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Longer NHS waiting lists and a narrowing in the range of operations provided by the state are boosting private hospital operators, which are increasingly chasing patients who can pay for treatment.
With the government attempting to cut £20bn from the NHS budget by 2015, and hospital trusts forced to become financially independent by 2014, medical commissioners are looking to save cash.
This has created opportunities for private hospital providers. Spire Healthcare, Care UK, Ramsay Health Care and Nuffield are among those stepping in to provide procedures such as hernias and cataract removal, which have become harder to access through the NHS.
Rob Roger, chief executive of Spire Healthcare, a private equity-owned provider, said the market was expected to grow “exponentially” as the gap between demand for healthcare and the NHS’s ability to deliver grows during the next 10 years.
“Waiting lists are increasing and procedures are being rationed,” he said. “If you are an individual over 40 and you have a hernia, you won’t be treated by the NHS, and that’s where our focus will be.”
Mr Roger added that the group was campaigning to make GPs aware of alternatives to the NHS.
Spire Healthcare, which has 37 hospitals and 10 clinics across the UK, said revenues had grown 4.8 per cent to £674m in the year to 31 December, driven by a 7 per cent increase in earnings from self-paying customers.
The increase in patients paying for treatment out of their own pockets comes amid an industry-wide decline in customers with private medical insurance.
Some 74 per cent of the industry’s revenues came from private insurance in 2007, but this fell to 61 per cent in 2010 as people were made redundant and lost employment-related healthcare benefits, according to Laing & Buisson, the analyst.
William Laing, chief executive of Laing & Buisson, said nearly all the private hospitals were chasing self-paying customers. A growing awareness of surgeons’ expertise and an emphasis on wellbeing overall were also driving the market for private healthcare, which was expected to grow 5 per cent this year, he added.
“You wouldn’t necessarily expect demand out of people’s household incomes to be rising, so it suggests perceptions of the NHS are having an impact and boosting private hospital operators,” Mr Laing said.
Spire said it was expanding its diagnostic capabilities and offering far more complicated medical procedures such as cardiovascular, skeletal, neuro-surgery and cancer treatments.
Formed five years ago, Spire invested £44m last year. It is planning to open two hospitals – one in Brighton this year and another in Maidstone in 2014 – as it targets areas with strong demand and low supply of medical services.
Care UK, which runs seven NHS treatment centres as well as care homes throughout the UK, is also seeking to expand in the self-pay market. Since March, the private equity-owned group has offered hernia repair, and carpal tunnel and cataract surgery.
“Recent reforms mean that some procedures of limited critical value are no longer available, or have become difficult for patients to access via the NHS. This has created an opportunity for Care UK to fill the gap by offering these procedures on the self-pay market,” the group said.
NHS work also continues to boost private hospital operators. According to figures by Laing & Buisson, the proportion of revenues earned from the NHS rose from 6 per cent in 2007 to 26 per cent in 2011, as the industry benefited from rules introduced in 2007 that gave patients the right to choose private hospital treatment, paid for by the NHS.
Spire reported operating profits up 9.2 per cent to £134m in 2011, on margins that had risen 19.8 per cent on the previous year. Despite the increase in profits, the company declared a pre-tax loss of £49m as a result of a private equity refinancing, which involved its parent company Cinven, based in Luxembourg.
Spire was formed from the sale of Bupa Hospitals to Cinven in 2007, followed by the purchase of Classic Hospitals and Thames Valley Hospital in 2008.