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Private health sector could face reduced business as NHS tightens its belt

BMJ 2011; 342 doi: https://doi.org/10.1136/bmj.d1115 (Published 17 February 2011) Cite this as: BMJ 2011;342:d1115
  1. Adrian O’Dowd
  1. 1London

Private sector mental health and specialist care providers could face tough times in the short term as the NHS tightens its financial belt and focuses on inhouse provision, according to new report.

A report from healthcare intelligence analysts Laing & Buisson says that public spending cuts will mean pressure for non-NHS independent specialist providers in the next three years, but the situation could improve in the medium to long term.

Mental Health and Specialist Care Services UK Market Report provides an analysis of the market in England for the independent mental health and specialist care sector, which provides services in mental health hospitals; care homes and non-residential care for learning disabled and mentally ill adults; children’s homes; fostering services; and special schools and colleges.

The analysis says that public sector outsourcing continued to drive growth of the independent mental health and specialist care sector in the past year, pushing the total value of independent supply to a new record high of £7.7bn (€9.1bn; $12.4bn).

The public spending cuts outlined by the government, however, will present a “major challenge” to providers of these services, says the report, with the next three years likely to see forced fee decreases, smaller referral volumes, and tighter profit margins.

The report says: “The slowdown and in some cases severe cuts to public sector funding will be by far the biggest challenge to independent sector providers of specialist care over the next three years.

“Public spending economies will undoubtedly put pressure on independent sector prices, volume of demand and profit margins across all areas of specialist care.”

Laing & Buisson said the previous Labour government’s policy of encouraging plurality of provision in the specialist care sector was set to continue as the new government had made it clear it supported a “level playing field,” giving opportunities for the independent sector to consolidate and increase its share of overall public sector demand that it services in the long to medium term.

According to the report, revenues among independent sector mental health hospitals with these facilities grew to £1.3bn in England by 2009-10—up from £1bn the previous year—making up 27% of the country’s bed capacity in this area.

Revenue among independent providers of care homes for adult with learning disabilities remained static at £2.7bn in 2009-10, while there was a slight rise in the revenues of operators of children’s homes from £585m to £587m.

The strongest growth, with revenues up by around 20% from £1.35bn to £1.6bn was the provision of non-residential care for learning disabled and mentally ill adults.

Report author and Laing & Buisson chief executive William Laing said: “The golden age of expanding public spending is now well and truly over, with the prospect of real cuts looming in 2011-12 when the former Labour government’s fiscal stimulus ends and the UK starts to pay back its debt mountain.

“One response will be for public sector agencies to ‘sweat’ their own assets by directing demand to their in-house provision.”

Mr Laing, however, said that the squeeze on the independent sector could be eased by a counter-tendency for the public sector to close some of its own assets which have become too expensive to maintain.

Notes

Cite this as: BMJ 2011;342:d1115

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