Private mental health providers could see pressure on their profit margins “ratcheted up” by the centralisation of secure and specialised mental healthcare commissioning in the hands of NHS England, according to a new report by market analysts Laing and Buisson.
The “England-wide flow of information” available to NHS England as a result of changes brought in by the 2012 Health Act stands to “greatly strengthen” the commissioner’s negotiating position with independent mental health providers, Laing and Buisson’s 2013 Mental Health Hospitals and Community Mental Health Services report states.
It notes independent mental health providers have faced pressure on prices and margins “across the board” in recent years, due initially to the concentration of some NHS commissioning in the hands of 10 specialised regional groups and latterly to the health service’s £20bn efficiency savings drive.
It states that this pressure is set to continue in the medium term, “and may be ratcheted up by a major move towards centralisation of secure and other specialised mental health commissioning under the NHS Commissioning Board [now renamed NHS England] from April 2013”.
Under the reforms, it continues, NHS England will not only commission all medium and low secure services, but also a group of services that were until now partly or wholly commissioned locally by primary care trusts. These include adult specialist eating disorder services, gender identity disorder services, and neuropsychiatry services, among others.
It states that this centralisation will give NHS England “an England-wide flow of information which will allow them to identify price variations and inconsistencies across similar services both by provider and by location, and this will greatly strengthen their negotiating hand, allowing them to put pressure on prices and margins they view as outside acceptable norms”.
The report adds: “This process clearly represents a threat to those independent sector providers with outlying prices, though the quid pro quo is that NHS providers will – according to the assurances of [NHS England] – be subject to the same financial disciplines, meaning that independent sector providers stand to gain volume as long as they are able to operate more efficiently than the NHS.”
According to Laing and Buisson, independent mental health hospitals generated estimated revenues of £1.14bn in 2012, of which 87 per cent was paid by the NHS or other public sector bodies.
Elsewhere, the report states that the implementation of the government’s NHS commissioning reforms could increase the scope for “outsourcing of community-based mental health services to the independent sector in the medium to long-term future”.
It states that one of the “specific changes” which could serve to open up the market is the transfer of responsibility for commissioning non-specialised mental health services to clinical commissioning groups, combined with the government’s controversial “Section 75” regulations on NHS procurement.
While the report notes that it “remains to be seen” how CCGs will interpret these regulations, it concludes that overall “the likelihood is that CCGs will put more services out to open competition from April 2013 than primary care trusts did previously.”