TABLE OF CONTENTS REPORT AUTHOR FOREWORD LIST OF TABLES LIST OF FIGURES ii iii ix xi EXECUTIVE SUMMARY 1 1. MARKET 5 1.1 Scope and definition 5 1.1.1 Revisions 5 1.1.2 Estimates for clinics 5 1.1.3 Market shares 5 1.2 Private acute medical care providers market size 6 1.3 Private acute medical hospitals and clinics market 7 1.3.1 Market size and growth trends 7 1.3.2 Provider market shares 9 1.4 Private patients only hospital market 9 1.4.1 Market size and growth trends 9 1.5 NHS Private Patients 12 1.5.1 Market size and growth trends 12 1.5.2 Regional trends 14 1.5.3 Future trends and prospects 15 1.6 Other private acute medical care components 16 1.6.1 Screening 16 1.6.2 Fertility treatments 17 1.6.3 Pregnancy terminations 19 1.7 Specialists private practice fee income 21 1.8 Funding by payor type independent acute healthcare hospitals and clinics 22 1.8.1 Self-pay spending non-cosmetic spending and cosmetic surgery revenues 23 1.9 Private acute medical care market structure and activity overview 24 1.9.1 Regional breakdown of capacity mainstream independent sector hospitals 24 1.9.2 Sub-regional capacity in London, the South East and East of England 25 1.9.3 Capacity trends over time independent sector hospitals and clinics 26 1.10 Activity independent sector s patient admissions 27 1.10.1 Mainstream hospitals (with inpatient/overnight bed capacity) activity data 27 1.10.2 Independent sector s share of admissions 28 1.11 Market structure of Private Patient Units and structural trends 29 1.11.1 Regional structural trends 29 1.12 Staffing Specialists 30 LaingBuisson Private Acute Healthcare, fifth edition v
Table of Contents 1.12.1 Consultant supply and private practice 31 1.12.2 Future supply of private practice 31 1.13 Performance measures 34 1.13.1 Profitability of the independent sector 34 1.13.2 Quality CQC judgements 36 2. POLITICS AND REGULATION 39 2.1 Politics past, present and future 39 2.1.1 Emergence and development of private acute medical care 1973 1997 39 2.1.2 Philosophical opposition to private healthcare under Labour 1997 2000 40 2.1.3 Engaging the independent sector to upscale NHS performance 2000 2010 40 2.1.4 The Coalition government reforms in action, 2010 2015 41 2.1.5 Political environment for the NHS under the Conservatives, 2015 onwards 42 2.1.5.1 NHS performance under the Conservatives and future funding 43 2.1.5.2 The development of choice for patients and use of the independent sector 45 2.1.5.3 Commissioning and NHS outsourcing partnerships 47 2.1.6 Labour Party policy for the NHS in 2018 49 2.2 Regulation of the independent acute medical care sector 49 2.2.1 Overview 49 2.2.2 Regulation of quality standards by the Care Quality Commission 51 2.2.2.1 Scope of independent acute medical care regulation in England 51 2.2.2.2 Outside the scope of regulation 51 2.2.2.3 The essential standards in England 52 2.2.2.4 Care Quality Commission developments for independent acute hospitals and clinics 52 2.2.3 Monitor and NHS improvement 55 2.2.3.1 Licensing 55 2.2.3.2 Setting NHS prices 56 2.2.4 Competition investigations 56 2.2.4.1 Office of Fair Trading 56 2.2.4.2 Competition and Markets Authority (previously Competition Commission) 57 2.2.4.3 Remedies and author s view 58 2.2.4.4 Remittal and appeals 59 2.2.5 PHIN and performance data 60 3. PAYORS 63 3.1 Private medical cover 63 3.1.1 Recent trends in private medical cover 63 3.1.2 Private medical cover market structure 65 3.1.3 Future prospects for private medical cover 66 3.2 NHS purchasing 67 3.2.1 Market value and trends 67 3.2.2 Activity and provider shares hospital admissions 69 vi Private Acute Healthcare, fifth edition LaingBuisson
Table of Contents 3.2.3 Admissions by specialty 72 3.2.4 Activity and provider shares diagnostics 73 3.2.5 Future prospects and trends 75 3.2.5.1 Independent sector providers and patient choice 75 3.3 Self-pay patients 77 3.3.1 Market value, & growth trends 77 3.3.2 Regional trends London versus the rest of UK 79 3.3.3 Provider self-pay trends 80 3.3.4 Historic trends 81 3.3.5 NHS performance waiting and treatment restrictions 81 3.3.6 Future prospects and trends 86 3.3.7 Cosmetic surgery 87 3.3.8 Cosmetic surgery future prospects and trends 89 3.4 Overseas 89 3.4.1 Market size and growth trends 89 3.4.2 Projections and prospects 90 4. MAJOR PROVIDERS 93 4.1 Independent sector market concentration and shares 93 4.2 Independent sector provider type 96 4.3 New independent acute medical capacity and structural trends 97 4.3.1 Capital investment by incumbents 100 4.3.2 Full-service & specialist inpatient acute hospitals 101 4.3.3 Day surgery only including specialist facilities 103 4.3.4 Outpatient and diagnostic clinics 104 4.3.5 Specialist outpatient clinics 105 4.3.6 NHS acute services managed by independent sector 107 4.4 NHS providers private income market shares 108 4.4.1 Specialisation 110 4.4.2 New PPUs including partnerships 110 4.5 Other acute markets 112 4.5.1 Screening 112 4.5.2 Fertility 113 4.5.3 Pregnancy Terminations 115 4.6 Independent sector major provider profiles 116 4.6.1 BMI Healthcare 116 4.6.2 Spire Healthcare 118 4.6.3 HCA 121 4.6.4 Nuffield Health 123 4.6.5 Ramsay Health Care 125 4.6.6 Care UK 127 4.6.7 The London Clinic 129 LaingBuisson Private Acute Healthcare, fifth edition vii
Table of Contents 4.6.8 Aspen Healthcare 130 4.6.9 Circle 132 4.6.10 Bupa Cromwell 134 5. INVESTORS 137 5.1 Major investor review 137 5.1.1 Netcare 138 5.1.2 Mediclinic International 138 5.1.3 HCA Healthcare Inc. 139 5.1.4 Tenet Healthcare Corporation 139 5.1.5 Bridgepoint Capital 139 5.1.6 Toscafund/Penta Capital 140 5.1.7 Aurelius 140 5.1.8 Fidelity International 140 5.1.9 RCapital 141 5.1.10 BlueGem Capital Partners 141 5.1.11 Life Healthcare 141 5.1.12 China Resources Group/Macquarie Group 141 5.1.13 Apposite Capital 142 5.1.14 CBPE Capital 142 5.2 Recent acquisitions 142 6. MARKET POTENTIAL 145 6.1 Demand 145 6.2 Supply 146 APPENDIX 1 GLOSSARY 149 APPENDIX 2 KEY LEGISLATION 153 APPENDIX 3 REGULATORS 155 APPENDIX 4 TRADE ASSOCIATIONS 157 APPENDIX 5 LIST OF PRIVATE PATIENT UNITS (WITH OVERNIGHT BEDS) 159 APPENDIX 6 FINAL CONCLUSIONS OF THE CMA S INVESTIGATION INTO PRIVATE HEALTHCARE 163 APPENDIX 7 FINANCIAL APPENDIX 167 viii Private Acute Healthcare, fifth edition LaingBuisson
LIST OF TABLES Table 1.1 Table 1.2 Table 1.3 Private acute medical care hospital market value (independent acute medical hospitals and clinics and NHS private patients) in the UK, 2003 2016 & 2017 projections 7 Private patients only hospital market value (independent acute medical hospitals and clinics private patients and NHS private patients) in the UK, 2003 2016 & 2017 projections 11 NHS private patient revenues in UK, private patient volumes in the NHS in England, and % of NHS finished consultant episodes in England, 1990/91 2016/17 13 Table 1.4 NHS private patient revenues by UK region, and real growth, million, 2013/14 2016/17 15 Table 1.5 Screening spending (market size) UK, real growth, and real index, 2000 2016 17 Table 1.6 Trends in fertility treatment, all sectors UK, 1991 2016/17 18 Table 1.7 Table 1.8 Table 1.9 Number of independent sector abortions in England & Wales, and estimated UK independent sector clinic revenues, 2003 2016 19 Independent acute medical hospitals and clinics UK market value, and revenues by purchaser, 2003 2016 & 2017 projections 23 Regional share of UK mainstream independent acute medical care hospitals, share of overnight bed capacity, and share of operating theatres, January 2018 25 Table 1.10 Independent acute medical care hospitals and beds, UK 1981 2018 26 Table 1.11 Patient admissions in mainstream hospitals (with overnight bed capacity), by type of admission and hospital type in the UK, calendar 2017 27 Table 1.12 Regional breakdown of PPUs with overnight bed capacity, UK, January 2018 30 Table 1.13 Table 1.14 Table 1.15 Table 2.1 EBITDAR margin and pre-tax profit/loss margin for major for-profit hospital operating companies latest accounting period, and previous year shown in brackets 34 Breakdown of (latest) CQC quality assessments of services provided by core independent hospitals in England (independent hospitals with inpatient facilities + day surgery hospitals of leading independent hospital groups), as at start of March 2018, covering 183 hospitals 36 Overall (latest) CQC quality assessments for core independent hospitals in England (independent hospitals with inpatient facilities + day surgery hospitals of leading independent hospital groups) by hospital provider, as at start of March 2018, covering 183 hospitals 36 CQC quality ratings for independent sector acute hospitals in England, 206 hospital locations as at 2 January 2018 53 Table 2.2 NHS tariff changes 2014/15 2016/17 56 Table 3.1 Private medical cover persons covered, payouts (claims paid), and average price for private medical cover policy, 1995 2016 64 LaingBuisson Private Acute Healthcare, fifth edition ix
List of Tables Table 3.2 NHS purchasing of UK independent acute medical care services, 2003 2016 & 2017 Projections 68 Table 3.3 Table 3.4 Table 3.5 Table 3.6 NHS funded hospital admissions for acute medical care in the independent sector in England, 2004/05 2016/17 & 2017/18 April to December 70 NHS funded admissions treated by independent sector (IS) providers by type of speciality in 2016/17 specialty share, proportion of all NHS admissions, and annual growth 73 NHS funded (provider based) diagnostic procedures carried out by the independent sector in England, 2009/10 2016/17 74 Private self-pay spending on acute medical care services in independent sector hospitals and clinics in UK, including non-cosmetic and cosmetic split, 2003 2016 & 2017 projections 78 Table 3.7 Proportion of self-financed treatment episodes in independent hospitals for 1981 1997/98 (England and Wales), 2001 2016 (UK) 81 Table 4.1 Capacity of major acute medical care hospital operators by number of overnight hospitals, overnight (inpatient) beds, and total operating theatres (OTs) in all facilities, January 2018 93 Table 4.2 Top 20 independent acute medical care hospital providers by revenue, 2011 2016 (calendar year unless otherwise stated), and 2016 market share 94 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Bed and revenue shares of the UK independent acute medical care hospital sector (excluding day only operators/facilities) by ownership group, 2016 & 2018 96 New independent acute medical care facilities in the UK by region, service type (fullservice or specialist) and treatment type (inpatient/day/outpatient), from 2014 onwards 97 Future new independent acute medical care facilities in the UK by region, service type (full-service or specialist) and treatment type (inpatient/day/outpatient), from 2018 onwards 99 Top 30 private patient Trust earners, annual growth and % share of UK NHS market, 2016/17 and 2015/16 109 Table 4.6 Revenues of leading specialist IVF providers in the UK, 2015 2017 114 Table 5.1 Main investors in the UK private acute medical care market, including source country, and investment start, at March 2018 137 Table 5.2 Significant acquisitions in the UK private acute medical care market, 2016 onwards 143 Table A5 List of dedicated NHS pay bed units, January 2018 by region, and management type 159 Table A6.1 Competition and Markets Authority Investigation into Private Healthcare Final Conclusions, April 2014 163 Table A6.2 Remedies Recommended by the Competition and Markets Authority, April 2014 164 x Private Acute Healthcare, fifth edition LaingBuisson
LIST OF FIGURES Figure 1.1 UK private acute medical care market value by component, 2016 6 Figure 1.2 Figure 1.3 Market shares (%) of the UK private acute medical care hospital market (independent sector hospitals and clinics + NHS private patient revenues) by provider, 2016 9 Real value index UK private acute medical care market, & private patient only (PPO) hospital market, 2003 2016 10 Figure 1.4 Market shares of the UK PPO hospital market by provider, 2016 12 Figure 1.5 Legal abortions carried out in England and Wales 1968 2016 20 Figure 1.6 Segmentation of public and private activity: abortions, England and Wales residents 2016 20 Figure 1.7 Figure 1.8 Capacity indicators (overnight hospitals (H), overnight beds (B) & operating theatres (OT)) by sub-region in London, the South East & East of England, January 2018 25 UK hospital (inpatient and day case) surgical activity breakdown by type of hospital supply (public NHS or private) and type of funding (public NHS or private), 1986 2017 28 Figure 1.9 EBITDAR margin of leading independent sector hospital groups, 2008 2016 35 Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 3.5 Figure 3.6 Market shares for total private medical cover market spending: insured premium income plus self-insured (Healthcare Trusts) derived spending combined, calendar 2016 65 Market shares (%) of NHS revenues generated by independent sector hospitals and clinics by provider, 2016 69 Monthly NHS funded elective surgery (provider based) admissions in independent sector in England, January 2013 December 2017 71 NHS funded acute medical care hospital admissions in independent sector in England in 2016/17 by provider (2015/16 in brackets) 71 NHS funded admissions treated by independent sector (IS) providers by type of specialty, 2016/17 72 NHS funded diagnostic procedures provider in the independent sector in England by provider group, 2016/17 (2015/16 in brackets) 74 Figure 3.7 London GVA (Gross Value Added) growth and Rest of UK GVA growth, 1998 2016 80 Figure 3.8 Figure 3.9 Figure 3.10 Number of NHS patients waiting for start of treatment, and average (median) time waited in England, March 2008 December 2017 82 Waiting time from GP referral to hospital treatment for NHS admitted patients in England Average (median) number of weeks of waiting and percentage of patients waiting more than 18 weeks, March 2008 December 2017 83 Average (median), lowest and highest number of weeks of waiting from GP referral to treatment (admission) on NHS by region, October 2017 84 LaingBuisson Private Acute Healthcare, fifth edition xi
List of Figures Figure 3.11 Average (median) waiting time from GP referral to hospital treatment for NHS admitted patients in England at October 2017 by type of treatment, and percentage change in average waiting over the past 60 months (October 2012 to October 2017) 85 Figure 3.12 Annual growth in plastic surgery procedures reported by BAAPS members, 2004 2017 88 Figure 3.13 Figure 4.1 Share of plastic surgery activity carried out by BAAPS members by type of procedure, 2011 and 2016 88 Market shares of Top ten hospital providers in private patient only independent acute medical care market, UK, 2016 95 xii Private Acute Healthcare, fifth edition LaingBuisson