These were the words in my closing comments at this week’s Private Healthcare Summit in London.
30 years ago, this week, I took my first steps in the private medical sector, and entered the palatial offices of AMI Healthcare (the predecessor of BMI) in Cornwall Terrace overlooking Regent’s Park. It was a very different world of private healthcare to the one that we live in today. It was the boom time for private hospitals. I undertook feasibility and marketing studies for new hospitals and developments of existing hospitals, and I can’t recall a feasibility that concluded: “This is a bad idea”. It was really a question of how quickly (not if) the new facility would reach profitable occupancy levels.
The presentations from our expert contributors to the Summit agenda told a very different story. Today, we face some of the most significant changes ever seen in the private healthcare sector.
It’s clear that we’re not going to see a significant recovery in the PMI market. At the peak, around 15% of the UK population were covered by PMI. According to LaingBuisson, this is now down to 10.6%. With a decline in their primary income source, the private hospitals have been rescued by the NHS. 30% of private hospital revenue is now NHS funded. In some hospitals, it’s as much as 50%. We have a mixed economy in acute healthcare. The NHS is in dire straits: waiting lists are at an all-time high, presenting one of the few opportunities for the private sector to grow its business. Estimates of growth in self-pay revenue range from 8% to 15%, but if the providers want to really grow the market they must look at new models of service delivery that can make private healthcare more affordable.
In the international patient business, the key source markets for London’s private hospitals and PPUs in NHS teaching hospitals are beginning to dry up. According to Graham Elderfield in his session on the GCC outbound patient market, “the bubble has burst”. GCC countries are cutting back on government funding of treatment abroad, bringing in compulsory health insurance schemes and investing in hospital development to keep patients at home. To sustain their international business, the London providers will have to look elsewhere… to China perhaps, or to Russia? Or adopt a new business model whereby their expertise is delivered to patients in the source market.
And… in a London market, that is already under pressure in the international market, we’ll see new entrants joining the fray - the Cleveland Clinic, Schoen Klinik and the Nuffield managed PPU at St Bartholomew’s Hospital. It’s going to get very competitive… the HCA response will be interesting.
Patient voice… patient choice…. patient experience… informed patients… These are the buzzwords of healthcare. Providers who react to this new environment and put the customer at the centre of everything they do will enhance their chances of success and create competitive advantage. Those who don’t, those who focus on what they do for patients rather than what customers want will be left behind.
The way that private hospitals work with insurers… the way that private hospitals work with consultants is going to change. The Cleveland Clinic plans to introduce a consultant employment model to the private sector. Will other providers follow their lead? The Competition and Markets Authority has been very clear about how the consultant-hospital relationship needs to be more distant. Organisations such as the Independent Doctors Federation led by their CEO, Sue Smith, will need to decide what direction they want this new relationship to take and how they can influence the new model.
Digital and technology change
Our “Heathcare Futurist”, Dr Tobias Gartner, certainly got our audience thinking about the digital future of healthcare. Technology is impacting everything we do… from diagnosing illness, to monitoring conditions and delivering after care. Digital will be a significant disruptor in the marketing and selling of private healthcare. Amazon is the biggest book seller without owning a bookshop. Hotels.com is the biggest seller of hotel rooms without owning a hotel. The day of the “virtual private hospital” may be fast approaching.
Turbulent times… and exciting times
So… not an environment in which anyone can afford to stand still. They may be turbulent times, but they’re also exciting times. We’ll see who is best adapted to change, who can move quickly and respond to opportunities; that will determine who will be still around at the Private Healthcare Summit in 5 years’ time.