NHS PPUs struggling to return to pre-pandemic activity

NHS private patient units (PPUs) are struggling to return to pre-pandemic activity levels despite a surge in demand for private patient services, according to the latest research from LaingBuisson.

Figures published today by the Private Healthcare Information Network show private patient activity reached record levels in the first half of 2023 – up 13% on pre-pandemic levels to 443,000 admissions.

However, despite a 43% increase on 2020/21 levels, UK PPU revenues remained down 20% on pre-pandemic levels in 2021/22 at £547.7m in 2021/22.

The figures, published in the eighth edition of LaingBuisson’s Private Acute Healthcare market report, show that despite remaining the region with by far the biggest NHS PPU revenue, London has lagged behind the rest of the country in terms of recovery. In 2021/22, London NHS PPUs generated income of £352m – up 34% on the previous year. However, this compares to an increase of 50% in the South East, 136% in the South West and 81% in the Midlands.

Nevertheless, there is not a single region in the UK where NHS PPU revenues have returned to pre-pandemic levels. In London and the South East, revenue was down 23% and 19% respectively on 2019/20 levels. PPUs in the North East have fared the worst of all English regions, generating revenue of £15.8m – 29% lower than pre-pandemic. PPUs in the East of England enjoyed the greatest recovery, with revenue of £36.4m – down just 6% on 2019/20.

Historically, NHS PPUs have grown at a slower rate than independent sector hospitals. The independent sector’s Compound Annual Growth Rate (CAGR) over 19 years is 6%, compared with 2.3% for NHS PPU’s. However, in recent years London-based PPUs have made significant inroads, particularly in the overseas patient market, holding onto activity in 2016 and 2017 at a time when independent sector providers saw international revenues flatten.

The six biggest PPUs are all in London, with a combined market share of just over 57%. The biggest, the Royal Marsden has grown revenue ahead of 2019/20, as has Guy’s and St Thomas’ and Moorfields. However, two of the most significant revenue declines have come from Imperial College Healthcare and Great Ormond Street Hospital. Both saw their income almost half during 2020/21 – Imperial remains £15.6m down on 2019/20 while GOSH is down almost £40m on the same period.

‘Indications are that revenue is bouncing back from the pandemic low, but it is unclear whether the wider pressures facing the NHS ‒ and potential pressure to focus on the core NHS-funded waiting list ‒ may be a limiting factor when it comes to any focus on generating higher private revenues from self-funders and overseas private patients,’ said report author and LaingBuisson director of research Tim Read.

Despite some successful expansion stories including recent partnerships with independent sector providers such as Nuffield at St Barts and HCA with University Hospitals Birmingham NHS Foundation Trust at its soon-to-open Harborne Hospital, the fragmented nature of the NHS PPU market alongside insufficient private patient demand in some localities have been limiting factors, which are now compounded by the challenges faced by NHS trusts.

However, Read added that the ability to generate private patient revenue remains a strategy aim for many trusts, in part due to those challenges.

‘There is widespread expectation that private patient demand will continue to grow and this has encouraged a number of trusts to put in place progressive plans for expansion,’ he said. ‘Trusts will face barriers to success though. There is high demand for additional NHS resources and existing capacity within facilities, therefore if additional NHS capital is going to be spent on expansion there will be pressure to ensure that this is targeted towards state-funded care. Location remains a primary driver, with some areas far more limited in their ability to generate revenue streams from private patients. It is no surprise that London tends to remain the place for more progressive and ambitious expansion of PPUs. London can always attract high quality staff and there is a clear patient pool within the local area, and also from the overseas medical tourism market.’