In the last year or so, several trusts have said that they want to increase their private patient income on a rather naive assumption that thousands of patients are desperate to spend their money with them. Private health in this country is in the doldrums and has hardly recovered from the recession, so it is naive to think that a NHS hospital's PPU will be a money spinner. PPUs are likely to be a drain of money since there is no guarantee that they will get enough private patients to pay for the investment they have had to make to shield the private patients from the NHS public. However, Foundation Trusts have recently been hit with a 1.5% cut in tariff (the payment for most elective procedures) and need another source of income, and private patients appears to be an easy ssolution.
A report by ippr in 2008 suggests that spending on private medical insurance (PMI) remained static over the previous decade at 2.81% of the entire UK economy. They suggest that in 2005, 6,536,000 people were covered by PMI (10.9% of the population) and that 51% of the insurance was paid by employers. Additionally, they suggest that in 2005 19% of the payment for private healthcare in hospitals was self-pay. More up-to-date figures from OFT suggest that by 2009 self-pay had fallen to 15% whereas income for private hospitals from NHS patients was 23% and from PMI was 61%.
The ippr report says:
"If waiting times are high and/or perceived treatment quality of the public system is low, [PMI] is perceived to be necessary for timely, high-quality medical treatment. As such, demand for [PMI] will be driven by middle and higher income groups. If waiting times are low and perceived quality is high in the public system, demand for [PMI] shifts towards non-clinical features such as 'convenience' of access to treatment, and 'hotel-like features' of medical facilities; as a consequence, [PMI] tends to concentrate among higher income groups only."which is common sense. It is reasonable to assume that in a time of austerity, when there is a free-at-the-point-of-use service available to all (hence basic coverage without the "non-clinical features" mentioned above), self-pay for private treatment would be considered to be an unnecessary luxury and private hospital income from self-pay would fall. PMI is less sensitive to an economic downturn (since the contributions are smaller), but clearly as incomes shrink it too would be considered an unnecessary luxury both by individuals and employers and so the proportion of people covered by PMI should fall.
Considering that the UK economy is in such a poor state, all of this suggests that private hospitals are in a bad position. Indeed, the Nabarro Healthcare Industry Barometer 2011 (pdf) survey says that 60% of respondents think that their income will not return to "pre-credit crunch levels" until after 2014 (this was up from the figure of 55% in their 2010 survey). Interestingly, the Nabarro survey says that 35% of respondents thought that "budgetary pressure in the NHS led to increased demand for private care provision". Further, the government policy of Any Qualified Provider, which means that patients can choose care in a private hospital, is one way that private hospitals can make up for any falls in self-pay or PMI patients, so it will be interesting to see how the 23% figure given above will change when AQP is introduced.
Private medical insurance clearly need to do something to increase their subscribers and one way to do this is to lower the cost of the product. A few days ago I got the following junk mail from Aviva:
"By choosing the Trust Care hospital list, you can reduce your monthly premiums by 25% by simply using private facilities within NHS Trust hospitals."This ignores the fact that by choosing the NHS you can reduce your monthly premiums by 100%! The letter raises some questions. Why is it that insurance for NHS PPUs is 25% cheaper than private hospitals, what is it that makes them cheaper? If PMI is recommending NHS PPUs does this mean that in the past when they have emphasised that private hospitals are clean and have expert care - and by implication that the NHS does not - that they were actually, wrong? Will we see PMI actually promoting NHS PPUs in the future?
PPUs have got the private hospitals spooked. The Nabarro survey says that 37% of respondents either agree or strongly agree that removing the PPI cap is a "threat to the independent healthcare sector". Since Aviva is now pushing PPUs as cheaper alternatives to private hospitals this backs up the pessimism about PPUs in the Nabarro survey.