The outlook for central London’s acute private hospital market remains uncertain as new figures from LaingBuisson indicate that revenues stalled in 2017 due to dampened demand from PMI and international patients.
Overall, the market, which includes private and voluntary hospitals as well as NHS private patient units (PPUs), was valued at nearly £1.6bn in 2017 against £1.47bn the previous year – equivalent to around 40% of the UK market for private patient revenues.
However, the small revenue increase was driven by strong growth in NHS PPUs and disguises a decline in independent hospital revenue.
The research, due for publication later this month in the fifth edition of LaingBuisson’s Private Acute Healthcare Central London, found that PPU revenues grew at a faster rate than the capital’s independent sector hospitals for the first time. A key factor appears to be the ability of NHS PPUs to continue attracting overseas embassy patients as a time when many independent hospitals are reporting a decline.
The strongest performing PPUs are also carving out niches for themselves in specialties such as oncology and paediatrics.
According to LaingBuisson, oncology services are the fastest growing specialty in the sector. Meanwhile, orthopaedics, which has long been the mainstay of the independent sector, shows little signs of growth.
Report author Ted Townsend said: ‘Some parts of the central London private acute market continue to grow, but overall the market is flat and it is undoubtedly changing. Providers can no longer rely on what were once strong and steady sources of income, such as international patients and patients with private medical insurance. In addition, EBITDAR margins have dropped eight percentage points from 22% to 14% in the last three years. This means that £80m in profit has left the market, perhaps never to return.
‘At the same time, competition from PPUs is getting stronger. Patient are attracted by their keen pricing and the reputation for specialties remains strong. Also, as self-paying patients become a larger group, if they are planning to mix-and-match their care between the NHS and private sector, there is the potential attraction of continuity of care as they move between sectors.
‘With so many new entrants to the market, it is hard to see how the profitability of the early 2010s will return, particularly given the broader economic environment. However, the growing interest in central London suggests expectation of future potential.’
A detailed report on LaingBuisson’s research on the central London private acute hospital market will feature in the March issue of Healthcare Markets.