Sector trends & challenges
Increasing cost base
Private healthcare is facing increased scrutiny by regulators which in turn is driving increased costs to deliver high quality and safe care. Higher quality is encouraged but balance sheets and liquidity may become under pressure.
Change in mix of services
Referral patterns from the public sector have changed following the impact of COVID-19. Elective work being performed by NHS Acute trusts was heavily impacted and waiting lists still haven’t been cleared as we approach 2022.
Globally, we expect there to be increased investment in private (and public) healthcare over the next decade. The healthcare supply chain is underpinned by increased demand driven by fear of new viruses and an ageing population.
Sector rating profile
The sector is not showing high levels of activity in terms of advisory support at present. This may change in the future as levels of distress increase, and the amount of investment in the sector increases.
Over the past 18 months, the private healthcare sector has risen to the aid of the NHS during the COVID-19 pandemic; however the sector is facing several pressing issues from both a financial and an operational perspective.
The private and public healthcare sectors are facing a rising cost base, amidst increased scrutiny from the Care Quality Commission (CQC) for the past several years. To address concerns raised by the CQC, in some instances the public sector has increased resource to deliver care. This trend is now becoming visible in private healthcare, where increased scrutiny by regulators is driving increased costs to deliver high quality and safe care. In order to maintain profitability, the sector needs to respond by finding efficiencies in their delivery of care whilst ensuring high standards are met.
Referral patterns from public sector have changed following the impact of COVID-19. For a large part of 2020, little to no elective work was being performed by NHS Acute trusts and waiting lists increased to unsustainable levels. This backlog has yet to be cleared as we approach 2022 due to further lockdowns and high case numbers during 2021. The public sector enlisted the support of COVID-free private hospitals to perform more elective activity, the mix of which may not be as profitable for the private sector as their typical service delivery. Consequently gross profit margins are likely to be lower than historical averages.
Private care homes have lost income since the pandemic began whilst also incurring rising costs. Fortunately, private operators have supported the NHS to help maintain some level of elective activity over this period which has reduced the fall in income. Private health providers may need to understand how to cost base to lower income into the medium-term. Opticians for example have witnessed a growth of online selling in the market, which may become a stronger trend following cost cutting requirements alongside the public’s nervousness in returning to physical shops. Even as we come towards the end of 2021, consumer confidence, especially in the older population, has yet to return to pre-pandemic levels.
Globally, there is likely to be increased investment in private (and public) healthcare, with the healthcare supply chain underpinned by increased demand. In the UK, there may be a trend towards insourcing some services amidst increased political focus on social care provision.