London Private Healthcare in 2025

Against a rapidly changing and unpredictable backdrop in terms of overall environment, a rising self-pay market, a flat PMI market and tariff reductions for NHS work, who are the new entrants to the private healthcare market in London and what information and challenges do they bring?

By 2025, if all goes to plan, it is likely that London will be home to three major new private hospitals. But, before looking these new entrants themselves, it is worth discussing the five key areas that will have an impact on the background in which they will operate:

The environment

Politically, the current environment for the private healthcare sector seems uncertain. Following a surprise hung parliament in the June 2017 General Election, structural changes to the NHS are unlikely and nothing in the Conservative manifesto shows that much thought has been given to private hospitals.1 The manifesto goes out of its way to avoid the word ‘private’ in the context of healthcare, there is no mention of change in insurance premium tax and no mention of encouraging employers to spend on private healthcare of their employees in order to reduce NHS burden.

The manifesto’s main commitment on health is on the 7 day NHS, though it is not clear how this is to be funded. Similarly, it is not clear how a pledge to review the NHS ‘internal market’ will play out; STPs may gain in prominence and patient choice be eroded as a consequence, but it is difficult to read between the lines at the moment.

Looking at the main funding streams for independent sector healthcare, NHS paid elective procedures have grown over the last decade to represent a quarter of UK private hospital revenues.2 However, the growth in PMI which was due to demographic change in the last ten years now looks to be at an end and the forecast is that there will be no demographic dividend for PMI, which most people drop when they retire.3 Indeed, an Intuition Market Study conducted in 2016 revealed that the industry consensus is that self-pay is seen as the way forward, with a likely growth of over 15%.

Rising self-pay

LaingBuisson data shows that self-pay revenues have grown rapidly and consistently over the past eight years, with the non-cosmetic proportion growing the fastest.

Decision drivers

So what are patients’ reasons for choosing private healthcare, for both PMI and self-payors?

  • Level of amenity, quality of hospital accommodation and availability of appointment times.4 Self-pay is, to a large extent, popular with people who are time-pressed and wish to schedule surgery
  • NHS waiting times.5 Since 2015 NHS waiting times have started to slip and the message in the 2017 Conservative manifesto on targeting has softened, referring  to an 18-week standard rather than target
  • Patient reported outcome measures (PROMS). The private sector consistently rank about the NHS for this data


It is important to look at what a growing self-pay market means for providers and how they can adapt to be successful in this developing sector, which, it is envisioned, will always be based on the bedrock of the NHS for those who don’t have private wealth or PMI.

Digital marketing to gain an intimate data-driven knowledge of customers and developing brand recognition will both be key. By knowing the true clinical and personal value of services, hospitals can promote them more effectively; better community involvement, such as offering use of lecture or teaching space, may help to get a hospital better known in its area.

It is also possible that new modes for delivery will be part of this process, with many more consultants working full time for independent hospitals by 2025.

Flat PMI

PMI has been flat at 6.9 million for around three years.6 There are also troubling signs since the recession such as the weakening of the correlation between PMI subscriber numbers and GDP growth7 and levels of PMI dropping below the number of senior managers8. On this basis, it is likely that volumes of PMI will remain flat and, if the Chancellor increases Insurance Premium Tax to 20%, they could drop significantly.

In real terms PMI cover prices have stagnated since 2008.9 As the 2008 recession occurred, companies cut PMI coverage, reducing demand and putting a downward pressure on prices. The stagnation may also be a reflection of previous price rises pricing out some self-subscribers and subscribers selecting lower premiums for less cover.

In terms of PMI as a business, the UK is about midway amongst the large European countries for insurer pay-out ratio at around 72% to 75%. However, although an attractive business at scale, PMI is not a particularly attractive business in the UK compared to other European countries with voluntary health insurance.10 PMI in the UK is very price competitive with the larger insurers like Bupa arguing that their customers are price sensitive and switch easily. Large providers such as Bupa also tend to have an older book with fewer young people to improve the mix.

NHS – risk

Although this discussion is primarily about London and there is less NHS work in London, it is worth addressing NHS spending in private hospitals, which has been a big growth driver nationally.11 Currently, private providers continue to take a significant volume, but are at risk of further reductions to tariffs;12 Spire is reporting an expected reduction in tariff of 3.9% and for Nuffield the figure is 4%, representing a significant tariff change for some common procedures year-to-year.

It could be argued that Monitor, the sector regulator for health services in England, recognises how important NHS work is to private providers and will continue to reduce prices. In this scenario, private providers will have to accept a reduction in margins and find other ways of becoming more efficient, by offering specialist clinics that focus solely on a particular treatment such as cataract surgery, for example.13

New London entrants

There are currently three major new private hospitals planned for London:

Nuffield London Hospital

Nuffield is planning to build a private hospital in the centre of London, adjacent to St Bartholomew’s Hospital in West Smithfield, EC1. The hospital will concentrate on cardiology and cardiothoracic surgery, building on Bart’s NHS Trust’s expertise in these areas.

Cleveland Clinic at 33 Grosvenor Place

Representing an important brand name and major investment from an internationally renowned firm, the Cleveland Clinic aims to open its first private hospital in Central London by 2020. Located opposite Green Park, the well-funded project will be of sufficient scale to be a worthy competitor to HCA hospitals.

The 215 bed hospital with 40 ICU beds and a full radiology suite is significant because it has a long investment horizon and there are plans to remake the business model by offering consultants a salary to work there full time. This will allow the hospital not only to provide a seamless service and guaranteed availability of consultants, but will also optimise the capacity utilisation, which in the case of private health, tends to be very low. Employed consultants will be phased in over the next 8 years.

Schön Klinik in Wigmore Street

Schön Klink is developing ‘the first integrated hospital for back pain in the UK’ based on its model at Rückeninstitut in Munich. Due to open in the Harley Street Medical District in late 2017, the 37 bed hospital will offer treatments in the fields of orthopaedics, neurology and spinal, as well as some psychosomatic services for eating disorders.

Like the Cleveland Clinic, Schön Klink is planning, as far as possible, to employ doctors, raising the possibility that the idea of working full time for a private hospital may take hold. At the moment, many consultants may be hesitating because to go full time means a substantial increase in indemnity insurance, however these new players may change their business models to indemnify their consultants themselves, perhaps partnering with other insurance companies that are not yet in the market.


  1. Forward, Together: Our Plan for a Stronger Britain and a Prosperous Future. The Conservative and Unionist Party Manifesto 2017.
  2. LangBuisson Private Acute Medical Care 4th ed. Pg 5, 11, 17.
  3. Aviva UK, ONS 2012 Population Projections.
  4. Competition and Mergers Authority, Gfk, Mansfield.
  5. NHS statistics, JRSM, Mansfield.
  6. LaingBuisson Private Acute Medical Care 4th ed., pg.13.
  7. LaingBuisson, ONS GDP Growth, Mansfield analysis.
  8. LaingBuisson, ONS Employment by socio-economic classification February 2014.
  9. LaingBuisson Annual Survey.
  10. Voluntary health insurance in Europe: role and regulation, p. 84, LaingBuisson Health Cover 2017, p. 30, LaingBuisson Health Cover 2015, p.119, HBI, Mansfield interviews.
  11. LaingBuisson Private Acute Medical Care Fourth Edition, page 19; Department of Health Annual Reports; NHS Reference Costs.
  12. NHS Improvement, National NHS Archives, Mansfield analysis.
  13. NHS Digital, Mansfield analysis.

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