Private healthcare providers and medical insurers maintain a constant – although often fraught – dialogue. The chief executive of Britain’s largest private hospital group tells Health Insurance editor David Sawers why he believes intermediaries must join in the debate
“I think Bupa would probably agree,” says Stephen Collier, group chief executive of General Healthcare Group, the parent company of BMI Healthcare. “It was a pretty bruising process.”
But if he’s got the bruises to prove it, the boss of Britain’s largest private hospital group isn’t showing them. In fact, sitting in BMI’s former offices overlooking the Thames in West London, Collier (pictured) says that his organisation’s high profile run-in with Britain’s largest private medical insurance (PMI) provider earlier this year is now water well under the bridge.
A shame, perhaps, for Health Insurance headline writers, but not for an industry that itself has taken a battering throughout the economic downturn. Although recent numbers from analyst Laing & Buisson appear to show a slowdown in the level of PMI market attrition, it is a sector that has veered towards self-destruction in recent times.
So what did go wrong with Bupa? The dispute – covered extensively by Health Insurance – centred around the delisting of 37 BMI hospitals by Bupa, a controversial letter sent by the former to patients about the latter, as well as a very public disagreement over the insurer’s so-called ‘open referral’ strategy.
Although the wounds are still raw – and although two hospitals are still not listed with Bupa – Collier, a barrister by training, remains sanguine.
A LEARNING PROCESS
“We’ve both learned where things work and where in that negotiation they didn’t work particularly well,” he explains, adding that a three-year agreement is now in place between Bupa and BMI and patients. “I think we’ve both come through it thinking ‘we don’t want to do that again’. So the good news is we’ve worked out what went wrong.”
Nonetheless, bitter words were exchanged during the dispute between the two heavyweights of their respective sides of the insurer/hospital divide. And given their size, the fallout has been significant. Bupa’s dominance in the PMI market is mirrored by BMI Healthcare in the private hospital market, with 69 hospitals and clinics nationwide handling over 250,000 inpatient and one million outpatient visits each year. When two organisations of that size collide, the repercussions are felt far and wide.
However, according to Collier – he has only been chief executive of General Healthcare Group for 14 months but has extensive experience of the private healthcare sector – “robust discussion around demonstrating value” is the norm when it comes to hospitalinsurer negotiations.
“Actually we have an interest in reaching longer-term positive relations with all our insurers,” he says. “So what we’re not doing is favouring any one against another. We want to be in networks because the nature of hospitals is there is an enormous fixed cost sitting there which needs to be utilised. We can only deliver efficiency if we are recognised by all major insurance companies, so that’s the starting position for any negotiation. But equally we can’t sign up to any terms that are offered. We have to be clear about the fact that we’re in a cycle where we need to be able to reinvest capital, we’ve got to pay our staff, and healthcare is an expensive commodity. But we’re not falling out with anybody, we try to maintain positive relations.”
BMI, Collier says, wants to build a “long-term” relationship with Bupa based on the “right mix of price and service quality”.
“We have sorted out the price, we’re now sorting out and being clear about the quality metric that we need and we must work to,” he says. “We’re happy to do that to ensure that Bupa subscribers get the right value proposition delivered.”
But while hospital providers and insurers do, no doubt, both want to work together for the common good, behind the scenes a huge amount of work is being carried out – and money spent – by the different parties trying to make their point of view count in the ongoing Competition Commission investigation into the mechanics of the private healthcare market.
OPEN REFERRAL
Nonetheless, relations between Bupa and BMI, Collier says, are now “amicable”, although open referral, remains “difficult”.
The system – introduced by a number of insurers but most notably by Bupa – means that, instead of referring patients directly to a named consultant, GPs will have to provide them with an ‘open’ referral for a procedure with no named consultant. In essence, it gives insurers much more of an influence over where a patient is treated and by whom.
“For some doctors it’s seen as a bit of a threat and there is some resistance within the medical profession to it,” Collier says, although he believes that for some patients it represents a “pragmatic response to a position where either the patients or the GP doesn’t have access to clear quality and service information”.
Collier believes that where open referral works “particularly well” is where the referral is supported by a “database of information of consultants, their particular sub-speciality, service, their quality metrics and their overall performance”. “At that level it makes perfect sense,” he says. “But I think the challenge with open referral is that […] it can be over engineered and over-applied. The risk is getting the right balance in the way that open referral is used – and used appropriately. So it’s a good entry mechanism provided it’s used on a selective basis.”
The open mindedness of Collier to new models of healthcare funding and delivery may perhaps come as a surprise to some commentators who have criticised Britain’s private hospital sector as a whole for failing to keep a lid on medical inflation and provide better value for money for corporate and individual insured patients.
Collier says that BMI’s focus is in fact “very much” on value for money and how it can deliver a “cost effective” service to PMI providers and how they, in turn, can deliver that to customers.
INTERMEDIARIES
With this in mind, over recent months Collier has sought to engage with Britain’s intermediary community in order to get a better handle on the types of products and services it wants – and at what cost. It is a tactic which is as refreshing as it is shrewd. After all, the absolutely crucial role that intermediaries play in the dynamics of the PMI industry – and therefore the private healthcare industry – has been overlooked by independent sector hospital and healthcare providers for too long. At the end of the day, it is the intermediary who has the clearest understanding of what corporate purchasers of healthcare want and expect.
“We’re engaging with intermediaries to try to understand what it is that clients require and how we can help to support that,” Collier says. “It’s only the last few months that we have started doing that, but I think it’s an important recognition that they have a view of what the corporate client is looking for. […] They’re helping the corporates make the decision about how they allocate funding across different benefit lines, whereas PMI providers are offering an insured product and therefore that’s the length at which they see it.”
Collier is keen to stress, though, that this new level of engagement with intermediaries “isn’t about squeezing out the PMI providers”.
“We also talked at some length about what they [intermediaries] saw in big corporate and small & medium corporate purchasing decisions around health insurance,” he says. “What was it that the hospital providers could be doing to make the product and the service as relevant as possible to decision makers in corporates? What is it that we need to do; how do they want us to work with insurers from an end user perspective?”
In response to intermediary feedback, BMI is running some “low key” pilots looking at how it can use its national network of hospitals to provide targeted corporate access to private healthcare at a local level.
“Where we’re able to engage with insurers in either product design or supporting initiatives in particular localities or catchments, we’re very keen to do that,” Collier explains. “We think that creates value for both parties and ultimately for patients and corporate subscribers. It makes the product more affordable and more accessible.”
This determination to re-engage with intermediaries and insurers around PMI and corporates, however, will of course need to be balanced against BMI’s commitment to treating NHS patients. Like many independent sector hospital providers, recent years have seen BMI carry out an increasing amount of NHS-funded work as part of various Department of Health initiatives to slash waiting lists. In fact, the percentage of patients at BMI hospitals whose treatment is paid for by the NHS has shot up from single digits around two years ago to 25% today. While that picture varies across the country – for example one BMI hospital in Lancashire is given over almost entirely to NHS treatment – it nonetheless presents a challenge. How, after all, can a private patient’s experience be differentiated from a NHS patient’s experience at the same facility?
“It’s a very complex area to manage because clearly you cannot select against patients who have a clinical need,” says Collier, who himself sits on two forums set up to connect the independent sector with the NHS. “Therefore the differentiation has to be on the non-clinical issues so much more around the hotel services.”
The fact that private hospitals are treating more NHS patients has not been singled out as an area of concern in BMI’s discussions with intermediaries, Collier says. In any case, he fully expects demand – and need – for a private alternative to state provision to rise as constraints on NHS funds become tighter.
In the meantime, however, neither he, nor intermediaries he has spoken to, believe the PMI market is ready for an immediate upswing in the short-term.
“Intermediaries said that the market will continue to be extremely challenging over the next couple of years,” he says. “There was no sense from the intermediaries that it’s all beginning to turn around. The sense from the intermediaries is we have seen two years of decline and we’ll keep seeing it.
So, is Collier braced for another bruising 14 months ahead? In terms of the economy, yes. But in terms of opportunity? No. “There are markets which are adjacent to what we do, we’ve got capacity, we’ve got a fully invested set of hospitals and we’ve got space in those hospitals to provide other services,”he says. “The important thing is to provide something which is a product we can do well, we can deliver safely and effectively and is something that the market is looking for. Making sure we get that combination right is something we’re working through at the moment.”
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STEPHEN COLLIER: BIOGRAPHY
Stephen Collier was in practice as a barrister until joining BMI Healthcare, the acute private hospital division of General Healthcare Group and the largest independent provider of private healthcare in the UK, in 1982. He then held posts as a corporate lawyer, executive director of Ross Hall Hospital, Glasgow, international director, commercial director, and general counsel. In early 2011 he was appointed strategy director and supported the development of the group’s NHS strategy and engagement. He was appointed group chief executive in June 2011. Stephen Collier has worked extensively with the Department of Health on the framing of care standards, is a member of the National Patient Safety Forum and the Department of Health Independent Sector Procurement Forum. He is also deputy chair of the NHS Partners Network and Treasurer of the Bar Council.