The private healthcare industry must work collaboratively to protect revenue under threat from corporate belt-tightening and increased access to private hospitals under the NHS choice agenda, according to speakers at a Laing and Buisson conference.
A major concern expressed by several speakers at the annual acute healthcare event, was the risk of further downturn in the corporate market, which represents 70% of the entire private medical insurance (PMI) market in the UK.
“Corporates are starting to get jittery about the cost of their benefits,” warned Nick Groom, distribution director at insurer AXA PPP Healthcare. “If we do not control costs we will see less people insured at a corporate level.”
He highlighted an increased use of procurement to purchase PMI as a “worrying trend”, having recently taken part in an “ebid” for one corporate contract. This shift has also been noted by Guy Blomfield, group strategy and commercial director at General Healthcare Group, the parent company of BMI Healthcare, the largest private hospital group in the UK. He suggested that these buyers would look to “bundle” corporate healthcare services such as PMI and occupational health or reduce the number of lives covered.
“There is risk of procurement driving us down the route to commoditisation,” James Parker, managing director UK of insurer CIGNA, told Health Insurance. “If we just respond by talking cost that will accelerate the commoditisation of PMI as a product. We need to respond by making sure we articulate the differences between our approaches.”
Charles Byrne, chief executive of Alliance Surgical, argued that the cost of private healthcare was simply “far too high”.
“We are fiddling while Rome burns if we do not acknowledge the elephant in the room which is the cost of the product,” he said, arguing that consultants should be engaged in finding ways to strip out “unnecessary costs” rather than being deployed as “technicians”. He gave the example of reducing the number of follow-up appointments for patients who have undergone routine surgery.
A network of over 1,000 surgeons and consultants serving insurers as well as NHS patients, Alliance Surgical has positioned itself in contrast to the Federation of Independent Practitioner Organisations (FIPO), which has regularly clashed with insurers’ attempts to contain costs. It is one of the organisations to which AXA PPP healthcare may refer patients given an open referral by their GP or unhappy about the shortfall they would incur if they saw the consultant to which they are referred (AXA PPP healthcare will cover Alliance Surgical fees in full)
A bone of contention during the conference was the importance of allowing patients and their GPs to choose a consultant. AXA PPP healthcare’s recent launch of Corporate Health Plan Pathways is just one example of the insurance industry’s attempts to help employers control costs by taking charge of referral to consultants. It enables large corporate clients to secure a discount of up to 15% by giving the insurer responsibility for choosing a provider to deliver the treatment recommended by the member’s GP (who must supply an open referral).
Byrne suggested that “GPs no longer have the knowledge and or interest in consultants’ sub-specialisation” and argued that his organisation could help both GPs and patients find the right consultant for them, warning that some consultants are undertaking work outside their speciality in the private sector. However, an audience member representing private hospital group Circle argued that GPs “are well informed about who the good people are” and warned that he had seen people referred to the wrong consultant when GPs had been taken out of the equation. While hospital group Ramsay Health Care’s chief executive Jill Watts said “we fundamentally believe that that [choice of consultant] is a key benefit for the insured”, BMI Healthcare is working closely with AXA PPP healthcare on its Pathways project.
“Choice generally is one of the cornerstones of PMI,” CIGNA’s Parker told Health Insurance. “If you start taking choice away by restricted hospital networks or enforced open referrals that devalues the PMI proposition so from our point of view we would want to leave people with as much choice as possible because that is what they value.”
CIGNA’s most recent approach to containing costs has been to enable GPs to refer patients directly for diagnostic tests or cognitive behavioural therapy (CBT), leapfrogging the traditional consultant appointment.
Another important theme at the conference was the impact of the NHS Free Choice Network, which means that NHS patients can choose to undergo elective operations in private hospitals prepared to accept the NHS tariff. While the number that currently take this route remains relatively small nationally (just 3.6% of NHS surgical work is carried out in the private sector), some providers are now relying heavily on this source of revenue.
While Ramsay Health Care’s Watts argued that this is an effective way to make use of the large amounts of spare capacity in private facilities (which can be up to 50%), BMI Healthcare’s Blomfield warned that providers ran the risk of “confusing” the supply side and undermining the sector as a whole. He argued that differentiation in the service offered to privately insured patients and those taking advantage of the NHS agenda was “essential”.
“There is a real risk we could be downgrading private services,” he said, warning that the target market accessing the Free Choice Network has the same socio-demographic characteristics as PMI and self-pay patients.
While arguing that there was room in the market for hospital groups with a range of strategies (BMI Healthcare secures 90% of its income from the private sector while over 40% of Ramsay Health Care’s work comes from the NHS), he urged competitors to be more overt about their position in the marketplace.
Ramsay Health Care sees over 30% of the NHS patients who use the private sector under the choice agenda and Watts suggested that the choice programme had exposed patients who might not have otherwise considered PMI, to the standard of care available in private hospitals.
“Some have come in under NHS choices and come back as self-pay patients,” she said.
However, she also acknowledged that “we have a long way to go to be able to differentiate our products effectively,” and suggested that setting people’s expectations was “something we are not very good at in the healthcare industry”, comparing it to other sectors where differentiation is the norm, such as air travel.
“We are passionate that the privately insured market is our core reason for being there and it will remain the core focus of our business,” she said.