The Government's health reforms offer a £20 billion opportunity to the private sector, according to a new report aimed at encouraging profit-making companies to take a bigger share of the NHS.
Primary care in particular, is identified as a huge opportunity for the private sector to expand, with 2.2% of an ‘addressable market' of £8.3 billion so far under private provider control, according to the report from corporate finance advisers Catalyst.
While it identifies ‘significant challenges' to increased penetration of the primary care market – ‘fundamentally around ownership structure and access to pension entitlements' the report says Government measures such as removing practice boundaries and goodwill on GP practices offers ‘considerable scope' for the private sector to build large-scale business.
It predicts a wave of mergers and acquisitions in both primary and secondary care in the medium to long term, driven by ‘further promotion by the government of the alternative models used by the private sector, combined with the removal of regulatory barriers to the sector's increasing participation'.
The report singles out companies such as Circle, which took over running Hinchingbrooke Healthcare NHS Trust from the NHS in February, Virgin Care, awarded a £500 million contract by NHS Surrey to deliver community health services, and Serco, given a £140million contract to deliver community health services from NHS Suffolk, as examples of the public sector successfully leveraging private sector capital within the NHS.
It says: ‘The private sector currently delivers a very small proportion of primary and secondary care. However, if the government is to manage funding pressures and achieve improved outcomes for patients this will need to increase. The Government will need to access the capital investment potential of the private sector and make use of alternative models of healthcare delivery which focus on the community and home and away from hospital care. This is an opportunity for financial investors to invest in the earliest stages of this shift.
'Areas such as primary care, community health services and commissioning support services are potentially worth billions of pounds.
'The impact of the Health & Social Care Act on procurement, delivery channels and models is unclear. Nevertheless, the role of the private sector is increasing. If this is combined with the removal of barriers to higher participation, such as in primary care removing practice boundaries and goodwill on GP practices, investment would be boosted and the opportunity for the private sector to build business with scale will be considerable."
Justin Crowther, director at Catalyst and co-author of the report, said: ‘Despite many challenges, the private sector is increasingly providing healthcare services, whether paid for by the taxpayer or directly by consumers at the point of use.
'Whether this is to turn around underperforming hospitals, operate GP surgeries, deliver community services or create centres of excellence in areas such as pathology, [NHS] commissioners are increasingly using the skills and capital of the private sector.'