Putting resources into PPUs will always be controversial and many will be asking whether it is worth bothering, writes Hugh Risebrow
Having helped some central London trusts to further develop their private patient strategy, I became curious when I started doing similar projects for three provincial teaching hospitals.
The expected demand for private patient services in a particular geographic catchment can be estimated from demographic data, including penetration of private medical insurance, which still funds 75 per cent of private healthcare for UK based patients. The supply of private healthcare in the catchment can be estimated by looking at the size of private hospitals, estimating their revenue from their group accounts, deducting NHS funded work, and adding in any PPU revenues.
What happens when a patient with private medical insurance turns up, and needs a procedure which you don’t feel confident undertaking in the local private hospital? Some patients would travel to a private hospital further away, but the majority wait to be treated locally as NHS patients.
Whilst not a perfect methodology, two of the provincial areas threw up 25-30 per cent gaps between supply and demand. Curious, I investigated further. It is known that whereas London has large 100-200 bedded well equipped private hospitals with ICU beds, capable of providing nearly all of elective treatments available in the NHS, provincial private hospitals tend to be much smaller, often 30-50 beds, with much more limited equipment and facilities. This still didn’t explain the gap between supply and demand.
The next step was talking to c20-25 consultants in each trust, with private practice across a range of specialties. Generally the orthopods were very happy as the local private hospital looked after their needs well – they had good equipment and nursing staff who were very familiar with their procedures.
Orthopaedics accounts for almost 40 per cent of private revenue and often 60 per cent of NHS funded patients in a typical provincial private hospital. In each geography, consultants from one or two other specialties (different in each area) felt that the local private hospital broadly met their needs.
Other consultants felt increasingly uncomfortable doing anything more than minor procedures in these private hospitals – urologists who said that ward nurses saw too few TURPS to be trusted with post-operative care, GI surgeons who didn’t think the endoscopy suite was fit for purpose, unwillingness to invest in basic cardiology diagnostics, a lack of cath lab orLINAC and limited HDU beds etc etc.
So my next question to this latter group of consultants was what happens when a patient with private medical insurance turns up, and needs a procedure which you don’t feel confident undertaking in the local private hospital? Some patients would travel to a private hospital further away, but the majority wait to be treated locally as NHS patients.
Next stupid question, would these consultants like a PPU? The consultants were frustrated by their loss of private practice, but talked about a much less cavalier attitude than the private practice of 20 years ago – they simply wouldn’t treat patients in a private hospital where the outcomes may be worse than in the NHS.
Ideally they wanted to be able to offer private patients access to the same skilled nursing and AHP staff, equipment, and medical back up as NHS patients, but to provide clinics in a private quality setting, and private rooms for inpatient stays – essentially a private model which is clinically integrated with NHS care in the same way as it is at The Marsden, The Brompton and Great Ormond Street, which between them generate c35 per cent of the UK’s PPU revenues.
These consultants were quick to point out that the lack of a PPU meant that the NHS was effectively subsidising BUPA. So my next question was did the private medical insurers in these areas know that they were getting a partially free ride. The insurers’ websites allow you to obtain quotes online, and some sample results from two leading insurers are shown below (indexed to Devon = 100), based on the same cover for a 56 year old non-smoker with a BMI of 22 in each case:
|Area||PMI A||PMI B|
PMI will always be more expensive in central London as hospitals there are able to charge 10-20 per cent more than those outside London. The discrepancy between the quote for the same person living in Ashburton and Gerrard’s Cross can surely only be explained because the average PMI member in Ashburton is more likely to be treated as an NHS patient?
Private medical insurers do have a problem with value proposition in these areas. If I need a hip replacement I can get it free in the local hospital through e-referral, and if I need a radical prostectomy or radiotherapy I will be treated in the NHS anyway – why would a 65 year old retired couple pay £3000 pa. Around 80 per cent of private medical insurance is an employer funded perk.
The number of people paying for their own insurance, often those who have retired and no longer have company cover, has declined as NHS access has improved, and anecdotally many of these people now invest their PMI premium in ISAs which they can cash in if and when the NHS can’t treat them quickly.
So how big is the gap between the value of private healthcare actually being delivered in the sticks, and the value which could be delivered if the same range of private services were available as in central London? Not straightforward to analyse, but here is the reverse of my cigarette packet:
- The value of the UK hospital (excluding consultants’ fees) market for treating private patients was c£4.1 billion in 2017 according to Laing Buisson.
- Greater London has 13 per cent of the UK population, but 25 per cent of the UK’s PMI members.
- Central London hospitals and PPUs account for 37 per cent of the market, growing to 46 per cent if outer London private hospitals are included. The private hospitals in the provinces, with 87 per cent of the population only get 54 per cent of the business.
- This is distorted by central London treating c95 per cent of overseas patients who visit the UK, patients from the UK travelling into London, and London hospitals charging higher prices.
- Adjusting for these factors, we estimate that if provincial private patients could access the same range of treatments as those in London, that the private market outside London could grow by c£700 million.
- If these services were available to private patients in the provinces, the NHS may save c£400 million by not treating them
So why are the provincial private hospitals leaving £700million lying on the floor? The reality is that as healthcare becomes more specialised and clinical governance and outcome measurement become more rigorous, small provincial hospitals will have to focus even more on high volume specialties and lower complexity procedures.
In many provincial areas, where PMI membership rates may be 5-8 per cent (against 20 percent in London) volumes will be so low that it will only be clinically safe and cost effective to offer many services in PPUs where the clinical pathway is integrated with NHS services.
PPUs are growing faster than private hospitals but in 2017 only had revenues of £568m or 14 per cent of the market. Counter intuitively perhaps, PPUs in London, where large well equipped private hospitals offer much stronger competition, fare much better with 24 per cent of the London market, whereas those in the provinces only have 8 per cent of the provincial market. All of the top 10 PPUs by revenue are in central London.
Putting resources into PPUs will always be controversial, and many will be asking whether it is worth bothering. How much of the £700 million gap could PPUs collectively capture? How much would fall through to the bottom line of the local health economy, given that most of these patients are already being treated by the NHS?
The next question is how to go about it? This would be a good subject for another article, if I get asked to write one!