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MP93168

MAPS INDEPENDENT HEALTHCARE AUGUST 1998

Overview

Table of Contents

Executive Summary

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EXECUTIVE SUMMARY

The total UK market for independent healthcare services was £9.48 billion in 1996 and estimated to rise to £9.87 billion in 1997, a market growth of 4.1 percent. The independent healthcare service sector has been going through an extremely difficult period. A number of factors have caused significant consolidation in the marketplace as a whole although some market sectors have achieved significant growth. The recent downturn in the economy together with a number of government initiatives have had serious implications.

The single biggest sector, long term care has been the most seriously affected. The Community Care Act and initiative together with the effective removal of long term care subsidies from the majority of the population has resulted in a reduction of the numbers of people entering long term care in spite of demographic trends. Market share is predicted to fall from 61.7 percent in 1997 to 58.7 percent in 2002 and although demographic trends will eventually result in higher numbers of patients, profit margins will continue to be squeezed. The areas of opportunity within the sector will be in specialised nursing care and the premium end of the market. There has been significant activity in consolidations, acquisitions and mergers as companies develop extra services and economies of scale and the market is predicted to grow from £5.9 billion in 1996 to £6.09 billion in 1997 and rising to £7.55 billion in the year 2002.

Generally rather than competing directly with the NHS (excepting for acute care), the independent private sector has developed into a series of market niches, which are increasingly working in partnership with the public sector, rather than in direct competition against it. However, in some instances where contracted out work is involved, the independent sector can in turn become vulnerable to the pressure in the NHS.

The private medical insurance market has been seriously affected by the state of the economy, which has particularly affected corporate schemes. The market has also becoming increasingly crowded and competitive with the entry of commercial organisations. Companies are responding to the conditions by introducing increasingly larger ranges of more flexible policies tailored to the needs of different consumers. The market was worth £1.81 billion in 1996 growing to £1.92 billion in 1997 and projected to rise to £2.64 billion by 2002.

The Acute care sector has also been seriously affected by the state of the economy and its dependence on private medical insurance for funding and has not yet been able to capitalise on the growing NHS waiting lists. It has also been severely affected by the emergence of the NHS as a major player in the acute care sector, particularly because of its dependence on NHS consultants as a source of patients. In 1996 the market was nearly £1.2 billion rising to £1.25 billion in 1997 and is projected to increase to £1.67 billion by 2002.

In contrast, the psychiatric care market has seen significant growth although this sector is comparatively small. The market has grown primarily because of contract work from the NHS and the development of specialist fields of interest. In 1996 the market was £172.6 million rising to £193.3 million in 1997. The market is projected to grow to £359.3 million by the year 2002.

The NHS is emerging as the major player in the private acute care market. It has capitalised on its base of consultants, extensive facilities, economies of scale and numerous sites of delivery as the hard pressed NHS attempts to develop extra sources of revenue. In 1996, revenues were £240 million growing to £254 million by 1997. In 2002 revenues are projected to be £370 million.

The palliative care market is unique in the independent healthcare market in that it is funded primarily from charity, although NHS investment is growing. With the incidence of cancer and AIDS rising, there is high demand for service. In 1996 the market was worth £144.3 million rising to £161.6 million in 1997. Services are anticipated to rise with the market increasing to £265 million by the year 2002.

Text © 1998 MAPS

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