Market Report st Edition August 2011 Edited by Lucy Capstick ISBN Private Healthcare

Transcription

1 Market Report st Edition August 2011 Edited by Lucy Capstick ISBN Private Healthcare

2 Foreword In today s competitive business environment, knowledge and understanding of your marketplace is essential. With over 30 years experience producing highly respected off-the-shelf publications, Key Note has built a reputation as the number one source of UK market information. Below are just a few of the comments our business partners and clients have made on Key Note s range of reports. "The test of any marketing strategy and plan lies in the quality of information used, upon which marketing judgments and decisions are based. Quality is the key word here. The Key Note reports are an excellent source of such quality information, covering a wide variety of product sectors." The Chartered Institute of Marketing "We have enjoyed a long-standing relationship with Key Note and have always received an excellent service. Key Note reports are well produced and are always in demand by users of the business library. Having subscribed to Market Assessment reports for a number of years, we continue to be impressed by their quality and breadth of coverage." The British Library "Key Note is an invaluable resource which is reliable and easy to use. With a wide range of reports, it is useful for monitoring the outside world. Staff are always very helpful." The National Trust "The US Commercial Service in London has been subscribing to Key Note market research reports for over 5 years. We find the reports an invaluable resource in our business counseling activities to the US companies wishing to enter the UK market with products and services. The reports market data, competition, and forecast sections are especially useful." US Embassy "I regard Key Note as the number one provider of UK market research. The way Key Note content is packaged and presented is appealing and easy to understand and therefore a must for my taught course students. Its products are complemented by remarkably high levels of customer service." University of Cambridge, Judge Business School Key Note Ltd 2011

3 Contents Contents Executive Summary 1 1. Market Definition 2 REPORT COVERAGE...2 MARKET SECTORS...2 Long-Term Care...2 Acute Care...3 Psychiatric Care...3 Private Medical Insurance...3 Primary Care...3 MARKET TRENDS...4 Rising NHS Hospital Waiting Times...4 PMI Sector Affected by Recession...4 An Aging Population...4 ECONOMIC TRENDS...5 Population...5 Table 1.1: UK Resident Population Estimates by Sex (000), Mid-Years Gross Domestic Product...5 Table 1.2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices ( m), Inflation...6 Table 1.3: UK Rate of Inflation (%), Unemployment...7 Table 1.4: Actual Number of Unemployed Persons in the UK (million), Household Disposable Income...7 Table 1.5: UK Household Disposable Income Per Capita ( ), MARKET POSITION...8 The UK...8 Table 1.6: Average Weekly UK household Expenditure on Private Healthcare and Health Services ( ), Table 1.7: UK Government Expenditure by Sector/Area (%), Overseas...9 Key Note Ltd 2011

4 Contents 2. Market Size 10 THE TOTAL MARKET...10 Table 2.1: The Total UK Private Healthcare Market by Sector by Value ( m), Figure 2.1: The Total UK Private Healthcare Market by Sector by Value ( m), BY MARKET SECTOR...11 Table 2.2: The Total UK Private Healthcare Market by Sector (%), Figure 2.2: The Total UK Private Healthcare Market by Sector (%), Long-Term Care...12 Table 2.3: The Number of Long-Term Care Beds for Elderly, Chronically Ill and Disabled People in the UK by Type, Table 2.4: The UK Long-Term Care Market by Subsector by Value ( m), Acute Care...16 Table 2.5: The UK Private Acute Care Sector by Value ( m), Psychiatric Care...16 Table 2.6: The UK Psychiatric Care Sector by Value ( m), Mental Health Hospitals...17 Table 2.7: The UK Mental Health Hospitals Subsector by Value ( m), Care Homes...18 Table 2.8: The UK Care Homes Subsector by Value ( m), Private Medical Insurance...19 Table 2.9: The UK Private Medical Insurance Sector by Value ( m), Table 2.10: Number of Subscribers and People Covered by Private Medical Insurance (000), Primary Care...20 Table 2.11: The UK Primary Care Market by Subsector by Value ( m), Private GP Services...21 Occupational Health Services Industry Background 22 RECENT HISTORY...22 NUMBER OF COMPANIES...22 Table 3.1: Number of VAT- and/or PAYE-Based Enterprises Engaged in Human Health Activities by Turnover Sizeband, 2009 and EMPLOYMENT...23 Table 3.2: Number of VAT- and/or PAYE-Based Enterprises Engaged in Human Health Activities by Employment Sizeband, 2009 and REGIONAL VARIATIONS IN THE MARKETPLACE...24 Key Note Ltd 2011

5 Contents DISTRIBUTION...24 Long-Term Care...25 Acute Care...25 Psychiatric Care...25 Private Medical Insurance...26 Primary Care...26 HOW ROBUST IS THE MARKET?...26 LEGISLATION...26 KEY TRADE ASSOCIATIONS...28 Association of British Healthcare Industries...28 Association of British Insurers...28 British Healthcare Trades Association...28 British Medical Association...29 Commercial Occupational Health Providers Association...29 English Community Care Association...29 Federation of Independent Practitioner Organisations...29 General Medical Council...29 H5 Private Hospitals Alliance...30 The King s Fund...30 The National Institute for Health and Clinical Excellence...30 National Pharmacy Association...31 Royal College of Nursing Competitor Analysis 32 THE MARKETPLACE...32 MARKET LEADERS...32 Atos Healthcare...32 AXA PPP Healthcare Ltd...33 Barchester Healthcare Ltd...34 BUPA Care Homes (CFG) PLC...34 BUPA Insurance Ltd...35 Capita Health Solutions Ltd...36 Care UK Ltd...37 Craegmoor Healthcare Company Ltd...38 Four Seasons Health Care Ltd...38 HCA International...39 Netcare Healthcare UK Ltd...40 Nuffield Health...41 Partnerships in Care Ltd...42 Priory Group (Priory Investments Holdings) Ltd...43 Ramsay Health Care UK Operations Ltd...44 Key Note Ltd 2011

6 Contents Southern Cross Healthcare Group...44 Spire Healthcare Ltd...45 St Andrews Healthcare...46 OUTSIDE SUPPLIERS...47 Pharmaceuticals...47 Medical Equipment...47 MARKETING ACTIVITY...48 Main Media Advertising Expenditure...48 Table 4.1: Main Media Advertising on Private Healthcare Insurance ( m), 2010 and Strengths, Weaknesses, Opportunities and Threats 49 STRENGTHS...49 WEAKNESSES...49 OPPORTUNITIES...50 THREATS Buying Behaviour 51 CONSUMER PENETRATION...51 Table 6.1: Penetration of Private Health/Medical Insurance (% of respondents), Year Ending December KEY NOTE SURVEY...52 Uptake of Private Medical Insurance...53 Table 6.2: Uptake of Private Medical Insurance (% of respondents), Use of Healthcare Services...53 Table 6.3: Use of Healthcare Services (% of respondents), Attitudes and Concerns Regarding Healthcare...54 Table 6.4: Attitudes and Concerns Towards Healthcare (% of respondents), DEMOGRAPHIC RESULTS...55 Uptake of Private Medical Insurance...55 Table 6.5: Uptake of Private Medical Insurance (% of respondents), Year Ending June Use of Healthcare Services...58 Table 6.6: Uptake of Healthcare Services (% of respondents), Year Ending June Table 6.7: Uptake of Other Private Healthcare Services (% of respondents), Year Ending June Attitudes and Concerns Surrounding Healthcare Services...64 Table 6.8: Reasons for Taking Out Private Medical Insurance and Preference for Private Healthcare (% of respondents), Year Ending June Key Note Ltd 2011

7 Contents Table 6.9: Preference for the NHS and Attitudes Towards Going Abroad for Treatment (% of respondents), Year Ending June Current Issues 70 THE ECONOMY...70 NHS REFORM...70 PRIVATE HEALTHCARE MAY BENEFIT FROM NHS CHANGES...71 OFT LAUNCHES PRIVATE HEALTHCARE STUDY...71 THE CASE OF SOUTHERN CROSS HEALTHCARE The Global Market 73 TOTAL MARKET SIZE...73 Table 8.1: Health Expenditure in Selected Major Countries and Health Expenditure as a Percentage of GDP (% and $), Table 8.2: Expenditure on Private Healthcare as a Percentage of Total Expenditure on Health in Selected Major Countries (%), MAJOR GLOBAL MARKETS...76 Europe...76 The US...77 Australia Forecasts 79 INTRODUCTION...79 Population...79 Table 9.1: Forecast UK Resident Population by Sex (000), Mid-Years Gross Domestic Product...79 Table 9.2: Forecast UK Growth in Gross Domestic Product in Real Terms (%), Inflation...80 Table 9.3: Forecast UK Rate of Inflation (%), Key Note Ltd 2011

8 Contents Unemployment...80 Table 9.4: Forecast Actual Number of Unemployed Persons in the UK (million), FORECASTS 2011 TO Table 9.5: The Forecast UK Total Private Healthcare Market by Sector by Value ( m), Figure 9.1: The Forecast UK Total Private Healthcare Market by Sector by Value ( m), Long-Term Care...82 Table 9.6: The Forecast UK Long-Term Care Market by Value ( m), Acute Care...83 Table 9.7: The Forecast UK Private Acute Care Market by Value ( m), Psychiatric Care...83 Table 9.8: The Forecast UK Psychiatric Care Market by Value ( m), Private Medical Insurance...84 Table 9.9: The Forecast UK Private Medical Insurance Market by Value ( m), Primary Care...84 Table 9.10: The Forecast UK Primary Care Market by Value ( m), MARKET GROWTH...85 Figure 9.2: Growth in the Private Healthcare Market by Value ( m), FUTURE TRENDS...85 The Care Homes Sector...85 NHS Reforms May Boost Private Health Insurance Take-Up Company Profiles 87 AXA PPP HEALTHCARE LTD...88 BUPA CARE HOMES (CFG) PLC...90 BUPA INSURANCE LTD...92 CAPITA HEALTH SOLUTIONS LTD...94 CARE UK LTD...96 CRAEGMOOR HEALTHCARE COMPANY LTD...98 NUFFIELD HEALTH RAMSAY HEALTH CARE UK OPERATIONS LTD ST ANDREW S HEALTHCARE Further Sources 106 Associations Publications General Sources Key Note Ltd 2011

9 Contents Government Publications Other Sources Key Note Sources Understanding TGI Data 112 Number, Profile, Penetration Social Grade Standard Region Key Note Research 114 The Key Note Range of Reports 115 Key Note Ltd 2011

10 Executive Summary Executive Summary This Key Note Market Report examines the private healthcare market in the UK, which is based on sector definitions outlined by Laing & Buisson. It covers long-term care (for the elderly and physically disabled), acute care, psychiatric care, private medical insurance (PMI) and primary care. The UK market for private healthcare was worth an estimated 30.39bn in 2010, up by 2.9% from 29.55bn in Annual growth of the overall private healthcare market slowed markedly during recession, from in excess of 5% between 2006 and 2008 to 3.8% and 2.9% in 2009 and 2010, respectively. Approximately 16% of the UK population currently has private health insurance and, unsurprisingly, penetration levels are the highest amongst those belonging to upper income groups. Consumer research commissioned by Key Note found an overwhelming majority of the UK population to be fiercely loyal towards the National Health Service (NHS), some of it no doubt on ideological grounds, but presumably also due to the large proportion of the population that are priced out of the private healthcare market. Whereas the market displayed remarkable resilience in the wake of the financial crisis and subsequent recession, certain sectors, notably private medical insurance, did feel an impact. Even companies operating in sectors that performed well struggled. This is exemplified by the case of Southern Cross, which got into difficulties as a result of a sharp rise in rental costs combined with significantly lowered revenues from the public sector. Nevertheless, Key Note expects the overall UK private healthcare market to continue to grow over the course of the next 5 years, albeit at a slower pace than previously anticipated, due to a number of economic factors, such as continued high employment rates and squeezed household disposable incomes, as well as cutbacks in funding derived from local authorities. Key Note forecasts that the total UK private healthcare market will reach 35.9bn by 2015, growing at an average annual rate of 3.4%. The long-term care market is expected to remain the largest private healthcare sector and is forecast to reach a value of 16.2bn in Key Note Ltd

11 Market Definition 1. Market Definition REPORT COVERAGE This Key Note Market Report examines the UK market for private healthcare, using sector definitions outlined by healthcare analysts Laing & Buisson, including the following market sectors: long-term care acute care psychiatric care private medical insurance primary care. Historically, private healthcare in the UK developed under the auspices of the National Health Service (NHS), which is funded through general taxation and was set up in 1948 as one of the world s largest and most comprehensive public healthcare services. Rather than acting as a competitor, the private healthcare system was initially designed to complement the NHS, offering procedures, such as cosmetic surgery and fertility services, which were largely unavailable within the public sector. The boundary between the public and private sectors began to blur in the 1980s, largely as a result of the introduction of market forces into the former. Under the Government of the time, the private sector was commissioned to provide services and facilities to the NHS. The private sector now provides a greater range of services, in addition to traditional elective surgery, and has also increased its presence within the hospital and care-home sectors. Private medical insurance (PMI) remains the most popular form of finance, although many people remain unable or unwilling to opt into private schemes. MARKET SECTORS Long-Term Care The long-term care sector comprises operators that provide long-term residential or nursing home care to people with chronic disabilities or conditions. Examples include terminally ill patients, geriatric patients, people suffering from dementia and those with physical disabilities. Most long-term care in the UK is supplied by private firms. Residential care homes have a qualified nurse available on call, whereas nursing homes cater for people that have a wider range of medical requirements and therefore offer 24-hour qualified nursing care. Key Note Ltd

12 Market Definition Acute Care Most private acute care is for routine elective surgery, especially in areas where NHS waiting lists tend to be lengthy. The sector has also been expanded to include services and procedures which are either unavailable or severely restricted in the NHS. Notable examples include fertility and abortion services, laser eye surgery and cosmetic and weight-loss surgery. The sector also includes a greater range of specialist services, such as diagnostic imaging and trauma care. Psychiatric Care The psychiatric care sector includes both independent mental health hospitals, as well as long-term care homes for people with learning difficulties or mental illnesses. This particular area of the market has seen increasing levels of outsourcing from the NHS and local authorities to the private sector. Private Medical Insurance Private medical insurance (PMI) represents the primary source of funding for private healthcare in the UK. Suppliers of PMI in the UK include both non-profit-making provident associations (such as BUPA), and publicly-listed insurance companies, such as AXA PPP Healthcare, with the latter growing in significance. Policies are either sold to private individuals or via corporate schemes as part of an employee benefit scheme. Primary Care Primary care represents an emerging sector within the private healthcare market. Most patients are referred to the private sector via general practitioners (GPs) within the NHS, who act as the gatekeepers for secondary public and private medical care. The majority of this sector is involved in privately paid services through GPs from the NHS, such as the completion of medical insurance certificates and vaccination procedures. The primary care sector also includes contracted-out occupational health services. Key Note Ltd

13 Market Definition MARKET TRENDS Rising NHS Hospital Waiting Times In July 2011, senior staff at the NHS warned that it was struggling to cope with the limited financial resources that are available following the public spending cuts implemented by the Coalition Government. The latest NHS statistics show that 15,667 patients waited more than 6 weeks to undergo a diagnostic procedure in May 2011, compared with just 3,378 in May The figures also revealed that 2.7% of patients were left waiting for 6 weeks or longer for diagnostic results. A further 1,800 patients waited more than 3 months almost a tenfold increase on last year s figure of 217. Average waiting times also increased year-on-year, but to a lesser degree, with the typical wait time for diagnosis increasing to 1.9 weeks in May 2011, compared to 1.8 weeks a year before. The flagship 18-week target for patients to be treated after first consulting a GP is also under pressure. Performance on other waiting-time markers is equally slipping (e.g. the 4-hour target wait time to be seen in Accident & Emergency [A&E]). PMI Sector Affected by Recession The PMI sector suffered the biggest impact from the recent recession. In 2009, the volume of demand for PMI in the UK fell by 5% the largest annual decrease on record to its lowest level since According to Laing & Buisson, economic prosperity and business/consumer confidence in the past has driven demand for PMI, and a strong and predictable business environment with healthy employment figures has traditionally corresponded with solid corporate demand for medical cover. The recent economic downturn therefore explains the significant decline in PMI, as high unemployment and business casualties have dampened corporate coverage and lowered consumer spending. An Aging Population The UK s population is rapidly ageing, with National Statistics predicting that the proportion of people aged 65 and over will increase from 16% in 2008 to 23% by 2033, primarily due to the large number of people born after the Second World War (WWII) and during the 1960s baby boomer period. This demographic trend is likely to benefit the care homes and nursing homes sector, thus boosting demand for long-term care beds. Laing & Buisson estimate that demand for long-term care beds will increase by 10% over the next 10 years. Key Note Ltd

14 Market Definition ECONOMIC TRENDS Population According to National Statistics, the UK s population is currently growing at an average annual rate of around 0.6% to 0.7% per year. A growing population should benefit the overall healthcare industry, while the UK s rapidly aging population will also have a positive impact on the market. This is also likely to bolster demand for more sophisticated medicine in the future. Table 1.1: UK Resident Population Estimates by Sex (000), Mid-Years Female 30,895 31,068 31,244 31,418 31,614 Male 29,689 29,918 30,154 30,374 30,609 Total 60,584 60,986 61,398 61,792 62,222 % change year-on-year taken from Population Projections Database does not sum due to rounding at source Source: Time Series Data Monthly Digest of Statistics (accessed June 2011)/ Population Projections Database (2008-based projections), National Statistics website Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen s Printer for Scotland) Gross Domestic Product Between 2003 and 2008, UK gross domestic product (GDP) grew at a year-on-year rate of approximately 5%, a growth driven by high consumer spending and low interest rates. In 2008, as a result of the financial crisis, growth slowed markedly to 2.9% (at current prices). GDP dramatically turned negative by 3.5% in 2009 as the country entered recession. In 2010, the UK officially emerged from recession and GDP increased by 4.2%. However, annual chain-linked figures indicate that GDP growth remains well below levels registered prior to Key Note Ltd

15 Market Definition Table 1.2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices ( m), Current prices 1,328,363 1,404,845 1,445,580 1,394,989 1,453,616 % change year-on-year Annual chain-linked GDP 1,328,363 1,364,029 1,363,139 1,296,689 1,312,911 % change year-on-year GDP gross domestic product Source: Economic & Labour Market Review, May 2011, National Statistics website Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen s Printer for Scotland) Inflation UK inflation rose gradually in the years leading up to 2007, before dropping by 0.3 points in By the end of 2009, despite the high price of a number of commodities e.g. fuel, clothing and certain foods), inflation turned negative. Since then, however, inflation has picked up and risen sharply, with latest figures placing it at 4.6% in Table 1.3: UK Rate of Inflation (%), Inflation (%) Percentage point change year-on-year Note: inflation is at retail price index (RPI); data shown are annual averages. Source: Focus on Consumer Price Indices Data for April 2011, published May 2011, National Statistics website Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen s Printer for Scotland) Key Note Ltd

16 Market Definition Unemployment In 2004, the number of unemployment benefit claimants in the UK stood at 85,000 its lowest level in over a decade. This number remained at comparable levels up until In 2008, the economic downturn began to severely impact the labour market, sending UK unemployment figures rising. The number of benefit claimants rose to a 13-year high of 1.53 million in 2009, before it began to decrease again in 2010 to 1.5 million. A high unemployment rate has a negative impact on the private healthcare market, as many may not be able to afford to pay for private healthcare treatment or private health insurance. Table 1.4: Actual Number of Unemployed Persons in the UK (million), Actual number of claimants (million) % change year-on-year Source: Time Series Data Monthly Digest of Statistics (accessed June 2011), National Statistics website Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen s Printer for Scotland) Household Disposable Income Household disposable income increased year-on-year over the review period, although growth in this measure slowed markedly to around 1.7% in Although growth in household disposable income picked up again in 2010, it remains well below the rate of inflation and households are seeing the real value of their disposable income shrink. This is undoubtedly contributing to the downward pressure on the uptake of private medical healthcare and PMI. Key Note Ltd

17 Market Definition Table 1.5: UK Household Disposable Income Per Capita ( ), Household disposable income ( ) 14,080 14,453 14,976 15,225 15,676 % change year-on-year Source: Economic & Labour Market Review, May 2011, National Statistics website Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen s Printer for Scotland) MARKET POSITION The UK Data from National Statistics shows that average household weekly expenditure on health products and services amounted to 5.30 in 2009, up slightly from 5.10 in 2008, but still well below pre-recession values. Weekly expenditure on private healthcare, such as medical, optical and dental services, was 1.30 in 2009, while, expenditure on medical products, equipment and appliances (including medicines and spectacles, and NHS prescription charges) amounted to Table 1.6: Average Weekly UK household Expenditure on Private Healthcare and Health Services ( ), Private medical, optical and dental services Medical products, equipment and appliances Other Total Source: Family Spending, National Statistics website, Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen s Printer for Scotland) Key Note Ltd

18 Market Definition On a broader level, Government expenditure on healthcare amount to 120bn in 2010, accounting for 18% of total expenditure. In contrast, expenditure on private healthcare remained relatively small, at an estimated 30.39bn for the same year (see Chapter 2 Market Size). Table 1.7: UK Government Expenditure by Sector/Area (%), 2011 Health 18.0 Pensions 18.0 Welfare 16.0 Education 12.0 Others 36.0 Total Source: Overseas Data by the Organisation of Economic Co-Operation and Development (OECD) shows average healthcare spending in 34 OECD member countries accounted for 9.5% of total GDP in 2009, up from 8.8% in In 2009, average healthcare spending per capita also increased, with public spending on healthcare growing at a faster rate than the private sector. Globally, the People s Republic of China (PRC) and the US are the biggest consumers of private healthcare, with the private healthcare market also accounting for the majority of these countries overall healthcare expenditure (see Chapter 8 Global Market). Key Note Ltd

19 Market Size 2. Market Size THE TOTAL MARKET As stated in Chapter 1 Market Definition, the UK private healthcare market assessed in this Key Note report relies on the sector definitions outlined by healthcare analysts Laing & Buisson. It includes direct privately-paid revenue sources, such as private medical insurance (PMI) and primary care, as well as the acute care sector, where a small but significant percentage of fees are paid via National Health Service (NHS) outsourcing. Also included is the market for long-term residential and nursing care for the elderly, as well as care for the mentally ill and adults with learning difficulties. The market size, as estimated in this chapter, includes revenue from private individuals, as well as some funding from public healthcare and social care budgets. The overall private healthcare market has been growing steadily over the years, benefiting from a robust economy and consumer confidence, as well as increasing levels of NHS outsourcing. Growth, however, slowed markedly in the wake of the credit crunch and subsequent recession. The total UK private healthcare market was worth an estimated 30.39bn in 2010, up 2.9% from 2009, a fairly modest increase compared to pre-recession years. Table 2.1: The Total UK Private Healthcare Market by Sector by Value ( m), Long-term care 12,132 12,638 13,133 13,568 13,942 Acute care 5,879 6,238 6,760 7,186 e 7,510 Psychiatric care e 3,558 3,920 4,250 4,520 4,710 Private medical insurance 3,236 3,378 3,647 3,580 e 3,510 Primary care e Total 25,437 26,823 28,468 29,549 30,392 % change year-on-year e Key Note estimates Source: Laing s Healthcare Market Review 2010/2011/Key Note Key Note Ltd

20 Market Size Figure 2.1: The Total UK Private Healthcare Market by Sector by Value ( m), Value ( m) 35,000 32,500 30,000 27,500 25,000 22,500 20,000 17,500 15,000 12,500 10,000 7,500 5,000 2, Year Long-term care Acute care Psychiatric care Private medical insurance Primary care Source: Laing s Healthcare Market Review 2010/2011/Key Note BY MARKET SECTOR Table 2.2 shows the individual private healthcare sectors as a percentage of the total private healthcare market. As can be seen, the UK private healthcare market is dominated by the long-term care for the elderly and disabled sector, which accounted for nearly 46% of the total market in It is followed in size by acute care (25%), psychiatric care (15%), PMI (12%) and, with a mere 2%, primary care. Table 2.2: The Total UK Private Healthcare Market by Sector (%), 2010 Long-term care 46 Acute care 25 Psychiatric care 15 Private medical insurance 12 Primary care 2 Table continues... Key Note Ltd

21 Market Size Table 2.2: The Total UK Private Healthcare Market by Sector (%), table continued Total 100 Source: Key Note Figure 2.2: The Total UK Private Healthcare Market by Sector (%), 2010 Primary care 2.0% Private medical insurance 12.0% Psychiatric care 15.0% Long-term care 46.0% Acute care 25.0% Source: Key Note Long-Term Care The number of available places for elderly and physically disabled people experienced a rapid increase throughout much of the 1980s. This trend ended in 1993 when financing was taken over by local authorities, many of which had limited budgets. According to Laing & Buisson, in April 2010, approximately 0.8% of the 65 to 74 year-old UK population lived in a care home or long stay hospital setting, with this figure rising to 15.3% for those aged 85 and over. Key Note Ltd

22 Market Size The total number of long-term care places in the UK for the elderly, disabled and chronically ill amounted to 474,400 in 2010, an increase of 0.5% from 471,900 in Prior to 2009, the number of places for elderly and physically disabled people had fallen for 12 successive years marked a turning point for the long-term care sector, and demand for long-term care services is expected to rise driven by the aging population and the rising rates of disability and dependence of those that are elderly. Table 2.3 shows the number of long-term care beds for elderly, chronically ill and disabled people in the UK by type. The contraction in capacity has been most apparent in the public sector, reflecting the impact of the recent budget cuts on the public sector by the Government. In 2010, there were 46,200 places in the public sector, down from 58,700 places in The reduction has been particularly severe within the local authority homes sector, where the number of places decreased by 7,900, or over 20.5%, between 2006 and As a result, the share of overall capacity taken by the public sector has declined from 12.6% in 2006 to 9.7% in In contrast, the number of long-term care places within the private sector has increased by 4.7% over the same period. Much of this has been driven by growth in capacity within the private residential and nursing care homes. Between 2006 and 2010, the number of places in private residential and nursing care homes rose by 6.5%, which more than compensated for the 4.3% decline in capacity within the voluntary sector. Table 2.3: The Number of Long-Term Care Beds for Elderly, Chronically Ill and Disabled People in the UK by Type, Private Sector Private Personal care (residential) 180, , , , ,800 Nursing 161, , , , ,500 Total private 341, , , , ,300 % change year-on-year Voluntary Personal care (residential) 53,600 50,400 51,700 49,100 48,000 Nursing 14,200 15,900 14,500 17,500 16,900 Total voluntary 67,800 66,300 66,200 66,600 64,900 % change year-on-year Table continues... Key Note Ltd

23 Market Size Table 2.3: The Number of Long-Term Care Beds for Elderly, Chronically Ill and Disabled People in the UK by Type, table continued Total private sector 408, , , , ,200 % change year-on-year Public Sector Local authority homes 38,600 37,500 35,400 32,100 30,700 NHS units 20,100 18,200 16,900 16,200 15,500 Total public sector 58,700 55,700 52,300 48,300 46,200 % change year-on-year Total 467, , , , ,400 % change year-on-year Source: Laing s Healthcare Market Review 2010/2011/Key Note In value terms, the UK market for long-term care for elderly and physically disabled people amounted to nearly 14bn in The total value for this sector has been growing steadily since the early 1990s, up from 9.8bn in 2001 and from 11.56bn in However, the annual rate of growth shrank from around 4% to less than 3% between 2007 and 2010, mainly as a result of reduced expenditure by local authorities and NHS units (see Table 2.4). The private sector continues to dominate the UK long-term care sector, which accounted for 84.6% of the total long-term care market, while the public sector accounted for the remaining 15.4% of the total market. Between 2006 and 2010, the total value of the private sector grew by 20.8% to 11.79bn. In contrast, the value of the public sector contracted 9.2% over the same period to 2.15bn. Key Note Ltd

24 Market Size Table 2.4: The UK Long-Term Care Market by Subsector by Value ( m), Private Sector Private Personal care (residential) 3,561 3,848 4,036 4,180 4,428 Nursing 4,566 4,736 5,053 5,256 5,451 Total private 8,127 8,584 9,088 9,436 9,879 % change year-on-year Voluntary Personal care (residential) 1,189 1,220 1,244 1,269 1,268 Nursing Total voluntary 1,634 1,740 1,759 1,905 1,912 % change year-on-year Total private sector 9,761 10,324 10,847 11,341 11,791 % change year-on-year Public Sector Local authority homes 1,030 1,064 1,083 1, NHS units 1,340 1,249 1,203 1,183 1,162 Total public sector 2,370 2,313 2,286 2,226 2,152 % change year-on-year Total 12,132 12,638 13,133 13,568 13,942 % change year-on-year does not sum due to rounding at source Source: Laing s Healthcare Market Review 2010/2011/Key Note Key Note Ltd

25 Market Size Acute Care The private acute sector encompasses healthcare provided by the independent sector (both private and voluntary), medical/surgical and mental health hospitals and clinics, as well as healthcare provided to private patients in NHS hospitals in the UK and Health Service hospitals in Northern Ireland. It includes revenue funded by private medical insurance (PMI) for treatment, NHS contracts and income from one-off payments from patients without insurance. The private acute care market remained resilient throughout the economic recession, according to Laing & Buisson, growing in value by 8.4% and 6.3% in 2008 and 2009, respectively. The total value of the acute care sector has increased by 27.7% since 2006, although the annual growth rate has dropping gradually to below 5% in The UK market for private acute healthcare was worth an estimated 7.51bn in 2010, up by 4.5% from 7.19bn in Turnover for the sector was principally generated by independent hospitals, private specialist fees in independent hospitals and private patient fees collected by the NHS (including the Health Service in Northern Ireland). Independent hospitals accounted for the largest part of the total private acute healthcare market, generating around 71% of the total revenue in 2010, while private specialist fees and private patient fees accounted for 23% and 6% of the total, respectively. Table 2.5: The UK Private Acute Care Sector by Value ( m), e 2010 Value ( m) 5,879 6,238 6,760 7,186 7,510 % change year-on-year e Key Note estimate Note: includes total inpatient and outpatient acute care in independent hospitals including NHS pay beds and specialists fees. Source: Laing s Healthcare Market Review 2010/2011/Key Note Psychiatric Care The private psychiatric care sector covers private hospitals for mental health treatment, as well as care homes for sufferers of mental illness, addiction or those with learning difficulties unable to live independently within the community. Key Note Ltd

26 Market Size The UK market for the private psychiatric care sector was estimated to amount to 4.71bn in 2010, representing a 4.2% increase from the previous year. The care homes sector is the larger of the two, accounting for around 76% of market value in Table 2.6: The UK Psychiatric Care Sector by Value ( m), Value ( m) 3,558 3,920 4,250 4,520 4,710 % change year-on-year Source: Key Note Mental Health Hospitals Mental health hospitals generally cater for short-term acute psychiatric or addiction treatments, outpatient treatments and care for brain injuries and neuro-rehabilitation. There is some overlap with the care homes sector, for example, brain injury rehabilitation and alcohol and drug dependency services are provided in both mental health hospitals and care homes, but the overall mental health hospitals sector remains fairly distinct. The last decade has witnessed a remarkable expansion in independent mental health sector capacity, largely driven by increased NHS outsourcing. However, the NHS in-house provision continues to dominate overall supply in most mental health service segments. In the private sector, according to Laing & Buisson, about half of acute psychiatry and addiction treatments in the UK are privately paid, either through medical insurance or self-pay, while nearly all other independent mental health hospitals provision, including the remainder of acute psychiatry, is paid for by the NHS. Laing & Buisson estimate that UK-wide NHS spending on mental health in-patient, out-patient and community health services (excluding general practice, prescription medicines and provision of private psychotherapy and counselling services in unregistered premises) amounted to 12.5bn in 2008/2009. In 2010, the UK private mental health hospitals sector was worth an estimated 1.21bn, having increased by 6.8% in value terms from the previous year. Revenue for mental health hospitals has increased by 37.8% since Key Note Ltd

27 Market Size Table 2.7: The UK Mental Health Hospitals Subsector by Value ( m), e 2010 Value ( m) ,031 1,133 1,210 % change year-on-year e Key Note estimate Source: Laing s Healthcare Market Review 2010/2011/Key Note Care Homes Care homes for those with learning disabilities and the mentally ill represent a very large sector of the private healthcare market. Care homes services are not covered by PMI policies and nearly all of social care services are funded by the public sector, primarily local authorities with some additional NHS funding. In 2010, the turnover for care homes offering psychiatric care was estimated at 3.5bn, having increased by around 3.3% from the previous year. Annual growth slowed markedly in 2010, reflecting the Government s budget cuts to local authorities and the impact that this has had on the care homes sector. Table 2.8: The UK Care Homes Subsector by Value ( m), Value ( m) 2,680 2,991 3,219 3,387 3,500 % change year-on-year Note: data refers to care homes for adults below the age of 65 with learning difficulties or mental illness. Source: Key Note Key Note Ltd

28 Market Size Private Medical Insurance The UK PMI market was worth an estimated 3.51bn in 2010, representing a 2% decrease from 3.58bn in The fall in PMI demand during the recent economic downturn was of similar significance in both the company paid and individual/employee paid sectors. Laing & Buisson noted that the effect of the financial crisis on demand for private medical cover was not apparent in 2008, and the market experienced a strong growth of 8% driven by higher average prices paid by employers. However, income generated from private medical insurance fell marginally by 1.8% in 2009, and this downward impact was experienced equally across the corporate and personal sectors. The total value of the PMI market was predicted to have contracted further by 2% in Table 2.9: The UK Private Medical Insurance Sector by Value ( m), e 2010 Value ( m) 3,236 3,378 3,647 3,580 3,510 % change year-on-year e Key Note estimate Source: Laing s Healthcare Market Review 2010/2011/Key Note The number of PMI subscribers has experienced very little growth in recent years, as the customer base has remained broadly static. According to data from Laing & Buisson, the number of people covered by PMI has been falling steadily since 2000, and the figure contracted further in 2010 by 1.6% to 5.9 million. Unsurprisingly, high numbers of job losses and business casualties led to a clear narrowing of corporate coverage across most sectors, while recessionary pressures led to more cautious spending by individuals with reductions in many purchases considered non-essential. These combined factors were the main cause of the decline in the PMI sector. Key Note Ltd

29 Market Size Table 2.10: Number of Subscribers and People Covered by Private Medical Insurance (000), e 2010 Number of subscribers 3,574 3,586 3,608 3,425 3,290 % change year-on-year People covered 6,305 6,298 6,294 6,009 5,910 % change year-on-year e Key Note estimate Source: Laing s Healthcare Market Review 2010/2011/Key Note Primary Care The UK market for primary medical care is made up of two major sectors, namely private services offered by GPs and occupational health services contracted out to commercial providers. Table 2.11 shows the UK primary care market by individual subsectors by value. As can be seen, the primary care market was worth an estimated 720m in 2010, representing a 3.4% increase on the previous year. Since 2006, market value for primary care has grown by almost 14%. Revenues from private GP services continue to dominate the private primary care sector, accounting for a leading 76% of the overall primary care market in Table 2.11: The UK Primary Care Market by Subsector by Value ( m), Private GP services % change year-on-year Occupational health services % change year-on-year Table continues... Key Note Ltd

30 Market Size Table 2.11: The UK Primary Care Market by Subsector by Value ( m), table continued Total % change year-on-year Source: Key Note Private GP Services The estimated revenue for private GP services include all private spending by individuals and companies on private consultations with GPs in any location, including independent private medical practices, private walk-in centres, independent hospitals and mobile GPs visiting at home and in the workplace. There are thought to be in the region of around 300 private GPs in the UK. In 2010, the UK market for private GP services was worth an estimated 547m, an increase of 3.2% on the previous year. Occupational Health Services Occupational health services include medical and nursing services provided at the work place, such as monitoring and surveillance of risks to health, pre-employment and in-employment examinations and tests performed by doctors, nurses and other health professionals and associated consultancy and advisory services. Between 2006 and 2010, the UK market for occupational health services increased by 16.9% to an estimated 173m. Although the occupational health services sector is relatively small and underdeveloped, there is a potential for it to become a significant market sector in the future. Key Note Ltd

31 Industry Background 3. Industry Background RECENT HISTORY The private healthcare sector has gone though a considerable consolidation in recent years, the result of large hospital groups extending their portfolios, often via acquisition. Many of the leading UK operators are now owned by companies headquartered overseas, such as HCA Inc of the US and the Australian-based Ramsay Healthcare. At the same time, the sector is increasingly benefiting from greater levels of outsourcing by the Government, as it attempts to reduce the burden on the National Health Service (NHS) and cut waiting lists. The Independent Sector Treatment Centres (ISTCs), established in 2003, were a major effort by the Government to provide a private alternative for patients on NHS waiting lists. At the local level, outsourcing by authorities has been especially apparent within the care homes sector, both for the elderly and for those with learning or mental health difficulties. The latest NHS structural reform is expected to have a profound impact on the private healthcare market. In July 2010, the Government proposed plans to restructure the NHS in the White Paper Equity and Excellence: Liberating the NHS. Under the plans, general practitioners (GPs) and other clinicians will be given much more responsibility for spending the budget in England, while encouraging greater competition within the private sector. The reform looks set to provide significant new opportunities for the private healthcare sector. However, the Government s planned reforms have also raised fears of the NHS being privatised, as well as posing some risk of financial conflicts of interest due to large numbers of doctors having links with private healthcare companies (more information on NHS reforms can be found in Chapter 7 Current Issues). NUMBER OF COMPANIES According to National Statistics, there were 28,810 enterprises engaged in the area of human health activities in 2010; 820 more enterprises than there were in As Table 3.1 shows, in 2010, the vast majority (75.3%) of the enterprises engaged in human health activities were small- and medium-sized companies with turnovers of less than 1m. Compared with 2009, the number of enterprises with a turnover of between 50,000 and 99,000 increased by 360 (or 7.4%), while the number of enterprises with a turnover of between 100,000 and 249,000 increased by 395 (or 5.5%). In contrast, the number of those in the 250,000 to 499,000 and 500,000 to 999,000 brackets declined by 1.2% and 1%, respectively. Key Note Ltd

32 Industry Background Table 3.1: Number of VAT- and/or PAYE-Based Enterprises Engaged in Human Health Activities by Turnover Sizeband, 2009 and Turnover Sizeband ( 000) ,840 5, ,220 7, ,740 3, ,330 4,285 1,000-4,999 6,310 6,405 5, Total 27,990 28,810 Note: data excludes dental practice activities. Source: UK Business: Activity, Size and Location 2009 and 2010, National Statistics Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen s printer for Scotland) EMPLOYMENT Table 3.2 shows the number of VAT- and/or PAYE-based enterprises engaged in human health activities by employment sizeband in 2009 and As can be seen, the vast majority (95%) of enterprises engaged in human health activities in 2010 had less than 50 employees. The number of companies with less than 5 employees accounted for more than half (50.2%) of all enterprises engaged in human health activities. Key Note Ltd

33 Industry Background Table 3.2: Number of VAT- and/or PAYE-Based Enterprises Engaged in Human Health Activities by Employment Sizeband, 2009 and Number of Employees ,615 14, ,100 4, ,465 4, ,425 4, Total 27,990 28,810 Note: data excludes dental practice activities. Source: UK Business: Activity, Size and Location 2009 and 2010, National Statistics Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen s printer for Scotland) REGIONAL VARIATIONS IN THE MARKETPLACE According to the 2010 edition of UK Business: Activity, Size and Location, most companies engaged in human health activities are concentrated in London, followed in second and third place by the South East and the North West, respectively. DISTRIBUTION Private healthcare services in the UK are either being distributed directly from the NHS through its own hospitals and clinics, or being contracted out by the NHS to private healthcare companies. Key Note Ltd

34 Industry Background Long-Term Care In the long-term care sector, services on a residential setting are provided through care homes and continuing care facilities in the NHS hospitals. According to Laing & Buisson, in the private long-term care sector a 55% share of the market was held by for-profit major providers, while small businesses with fewer than three homes accounted for the remainder. The companies with the largest portfolios of homes for older and physically disabled people include Southern Cross Healthcare, BUPA Care Services, Four Seasons Health Care and Barchester Healthcare. As of July 2010, these companies owned or leased 86,000 registered care home beds between them, accounting for 24% of the UK s for-profit capacity for older and younger physically disabled people. Acute Care In the acute care sector, around 71% of private acute care services are distributed through independent hospitals and clinics in the UK. According to Laing & Buisson, there were 454 independent acute medical/surgical hospitals in the UK, with 210 of those being registered to take inpatients and 244 registered to carry out day surgeries only. Major providers of private acute care services include Netcare s General Healthcare Group, Spire Healthcare, HCA, Nuffield Health and Ramsay HealthCare UK. Between them, the five largest hospital operator groups own 190 acute medical/surgical hospitals with an overnight bed capacity of 7,354, or an estimated 79% of the UK independent acute sector bed total. Psychiatric Care According to Laing & Buisson, in 2010, there were 259 private or voluntary hospitals or units in the UK providing mental health services with a total of 9,291 mental health beds. The four largest mental health service providers are Partnerships in Care, Priory Healthcare, St Andrews Group and Cygnet Health Care. Together they operate around 43% of independent mental health hospital beds and generate around 53% of sector revenue. Other providers include Care Principles, Castlebeck Group, Huntercombe Hospitals, Alpha Hospitals, Cambian Healthcare and St Luke s Group. Leading independent sector providers of care homes for learning disabled and mentally ill adults include Craegmoor Group Ltd, Southern Cross Healthcare Group, Voyage Group, Four Seasons Health Care, CareTech, etc. Key Note Ltd