‘Sustained growth’ in private patient demand boosts Spire

Unprecedented demand for private healthcare against a backdrop of burgeoning NHS waits boosted top line growth at Spire Healthcare in the first half despite continued Covid disruption.

The London listed private hospital group announced revenue of £597.9m for the six months ended 30 June 2022 – up 7.1% on H1 2021 and 21.6% on H1 2019 as overall patient volumes returned to pre-pandemic levels.

Continued, strong demand from private patients was behind the improved results, said Spire, which generated 73% of revenue from insured and self-pay patients in H1 2022 compared to 68% in H1 2019.

Private patient revenue was up by more than 30% on pre-pandemic levels, driven by record growth in self-pay, which at £174.1m has almost doubled since H1 2019.

Spire Healthcare CEO Justin Ash said there had been a ‘sustained switch’ in consumer attitudes towards private hospital care. According to the Group’s own research, 60% of its target audience are now more likely to consider private treatment due to rising NHS waiting lists.

‘This is resulting in continued strong demand,’ he said. ‘Enquiries from self-pay customers have continued at the historic high levels we have seen since the start of 2021.’

Combined with continued momentum in the self-pay market, Ash said the main takeaway from H1 was strong recovery in PMI.

PMI revenue jumped by almost 15% year-on-year to £265.2m – an increase of more than 7% on pre-pandemic levels.

‘PMI, having been initially slow to recover post-pandemic has rebounded strongly in H1,’ said Ash. ‘We are now seeing greater PMI revenue compared to the pre-pandemic period and this growth is accelerating.

Spire chief commercial officer Peter Corfield said PMI outpatient volumes in H1 were converting into delivery in H2 and that PMI providers continued to build up their books in the corporate, SME and PMI markets.

‘We are in the unique space which we haven’t seen for a number of years where the insurers are actually seeing growth in their portfolios,’ he said.

With increased private patient activity and a move towards greater complexity across its case mix, Spire has seen average revenue per case (ARPC) leap from £2,642 in 2019 to £3,197 in H1 2022.

However, the business continued to feel the impact of Covid disruption, particularly over the summer when Ash said it lost 20% of bookings on a typical day. The Covid impact in July alone exceeded expectations by £6m and took a £25m toll on EBITDA in the full period.

Nevertheless, EBITDA was up 10.2% year-on-year and increased by 9.3% on H1 2019 to £105.8m.

EBITDA margins also improved to 17.7% from 16.1% in FY 2022, but remain down on the 19.3% recorded in FY 2019. Excluding Covid costs, EBITDA margins came in at 21.9% against 20.5% in 2021.

Adjusted pre-tax profit increased from £7m in H1 2021 to £8.6m this time around – although this was lower than the £10m booked in H1 2019

Ash said Spire’s model of focusing on private income and improved APRC through complexity and pricing, alongside its efficiency programme, was delivering results in spite of Covid and inflationary pressures.

‘This programme is on track as is our work on minimising supply and price rises through smart procurement,’ he said.

At its capital markets day earlier this year, Spire announced it was targeting a 70-80% private patient bias and launching new private primary care services in the wake of increased private demand.

NHS revenues fell by 21.5% on 2021 as Covid contracts came to an end but were back to pre-pandemic levels, with orthopaedics now tracking ahead.

Ash said NHS commissioning, primarily via e-referral, was beginning to strengthen and was likely to accelerate, which could skew the case mix in the short-term as additional capacity catches up with demand.

‘The underlying business is looking very resilient. Our good progress in H1 means that we continue to expect to deliver in line with our guidance and see good revenue growth and continued EBITDA growth,’ said Ash.

He said the Group’s revised strategy meant it was well positioned to continue to meet growing demand across the payor mix.

‘I am looking forward to the expansion of Spire Healthcare’s proposition into community-based clinics and extending our private GP provision, as we continue to grow and deliver for all our stakeholders,’ he added.