KN85044

KEY NOTE REPORT : Private Healthcare : May 2004

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This report covers:private healthcare, long term care, acute care, private health insurance, psychiatric care, primary care, health tourism, pharmaceuticals industry, medical equipment manufacturers, marketing activity, exhibitions and tradeshows, major illnesses and causes of death, improved NHS funding and NHS Plan, Foundation Hospitals, Treatment Tariffs, New GP Contract/out of hours service,

Companies covered include: Anchor Trust, AXA PPP, British United Provident Association, Bristol United Provident Association,capio Healthcare, Four Seasons Healthcare, GHG, Nestor Healthcare Group, Norwich Union Healthcare, Nuffield Hospitals, Standard Life Healthcare,

TABLE OF CONTENTS

EXECUTIVE SUMMARY

Key Note estimates that the UK private healthcare market was valued at £16.18bn in 2003, increasing by 6% between 2002 and 2003. Although the private healthcare market is comparatively small when compared with the National Health Service (NHS) and private healthcare in other developed countries, it has been growing in importance in recent years. For the purpose of this report, private healthcare in the UK is analysed in terms of five distinct market sectors:

• long term care
• acute care
• private health insurance
• psychiatric care
• primary care

Long term care relates to residential care, either in a nursing home or a residential care home.

Acute care relates to elective surgery, but excludes accident and emergency treatments. Private health insurance handles the market for private health insurance policies. Psychiatric care ranges from the treatment of acute psychiatric conditions to ongoing disorders such as substance abuse, but this sector does not include residential care for the mentally disabled. Primary care refers to private general practitioner (GP) services and occupational health services. Out of these five market sectors, acute care and psychiatric care have been the best-performing areas of private healthcare over the past 5 years. A number of political initiatives by the current Labour Government have had and will have a significant impact on the private healthcare sector in the UK.

The most significant development has been the sustained increased funding of the NHS, the private sector's main competitor. Ordinarily this would be a major threat to private sector healthcare. However, instead it has provided opportunities for growth and the Government's planned programme of reforms is likely to continue to open up new opportunities for the private healthcare sector in the UK because these reforms promote a partnership approach between the NHS and private healthcare.

A major limiting factor for the private sector and indeed the NHS is the current shortage of medical professionals in virtually all areas of medicine and nursing. Since 2000 and 2001, the private acute sector has benefited from the Government's initiative to cut waiting lists and waiting times for operations, because this has allowed the NHS to make use of the private sector to help clear the backlog of operations. Long term care is currently experiencing a period of slow growth due to a temporary decrease in the number of people aged 85 years and over. This demographic trend was caused by the effects of World War I.

Psychiatric care has been experiencing double digit growth in recent years, mainly as a result of the NHS contracting out acute psychiatric care to the private sector. Growth opportunities in primary care remain rather limited for private GP services as a result of competition in terms of price and service from NHS GPs and a general shortage of qualified GPs in the UK at the moment. Reforms to the NHS and reductions in waiting times for elective surgery have translated into slower growth for private health insurance and more people taking a `wait and see approach' with the NHS, and cutting back on private health insurance which is generally viewed as a luxury rather than an essential.

The outlook for the UK private healthcare market is positive with growth anticipated across all five market sectors. Although the NHS is being better funded by central government and is undergoing reform, these reforms are enabling the NHS to take a partnership approach with the private healthcare sector, and new areas of healthcare that have traditionally been dominated by the NHS, e.g. primary care, are likely to open up more to the private sector in years to come. The private healthcare sector as a whole is forecast to grow overall by 23% between 2004 and 2008

The strong housing market and the high level of home ownership were important drivers of the market between 1999 and 2003. Low interest rates in 2002 and 2003 helped home buyers to afford mortgages and encouraged consumers to spend, rather than save. Other economic trends, including rising household disposable income and modest levels of unemployment, were also favourable to the market.

Television home and garden `makeover' programmes have exerted a strong influence and have encouraged people to be more adventurous in their choice of décor. They have also helped to convince inexperienced amateurs that home improvements are within their capabilities.

The strong competitive pressure in the DIY market, the power of the DIY superstores and the availability of low-cost imported tools have kept prices down, and overall price inflation for DIY tools and equipment between 1999 and 2003 was almost nil. Product subsectors showing strong growth in 2003 included emulsion paint, cordless power tools, ceramic flooring tiles and garden woodcare.

Key Note expects that a slowdown in the housing market and more cautious spending by consumers will result in a reduction from the very high levels of growth seen from 2001 to 2003. Nevertheless, annual growth rates of 5% or more are forecast for the DIY market over the period to 2008.

Text © 2004Key Note

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Last updated by Amanda Porteous June 2004