The Private Patient Opportunity for NHS Trusts
Known as private patient units or PPUs, these services can be hugely profitable for financially constraint Trusts - achieving as much as 30% to 40% contribution margin on specialist / complex cases.
But many hospital Trusts across the country (and especially outside of London) have not attempted to develop PPUs or have fledgling services, which essentially consist of a few side rooms added to existing wards or designated wards which in practice run as ‘overflow’ for NHS patients.
So in the face of a proven business model, why haven’t Trusts done more to develop their PPUs? Having met with a number of Trusts across the country over the years, typically the reasons are:
- 'Cultural' barriers to offering private services alongside the NHS.
- Lack of senior management / board level backing.
- Lack of dedicated facilities, which includes dedicated beds, outpatient rooms, theatres and diagnostics (theatres typically being the bottleneck).
- Reluctance to ring-fence PPU capacity for private patients and managing NHS usage of private beds.
- Not offering a differentiated private patient experience including décor, food, TV etc.
- PPU office which does not function on par with comparable private hospitals in supporting consultants as well as patients.
Consultants are the real ‘customers’
Trusts have to start seeing consultants as ‘customers’ to their private patient business. This starts with having clear processes in place to facilitate continuous dialogue with the consultant body.
Studies have showed that up to 85% of GP referrals are to named consultants rather than ‘open referrals’. Moreover, even though consultants typically hold admission privileges in a number of Private Patient facilities, most tend to base the majority of their private work at one specific facility.
In my experience, consultants are naturally loyal to their NHS practice but are frustrated when arranging a private case is more complex and time consuming for them than arranging the same case at a competing private hospital. These issues can be addressed, however, through well functioning clinical governance group and an administration office which is plugged into listening to consultant feedback.
Trusts must embrace a more commercially minded approach
At a time when Trusts are fighting large deficits, a profitable Private Patient Unit can be very helpful. However, the good news is that the PPU model is now tried and tested and hence there is good evidence out there to build up a strategy and business case based on an addressable market opportunity. For Trusts which choose an external build of facilities, there are a plethora of investors available to fund these builds at competitive rates and a number of external partners ready to run these facilities on a profit-share basis.
Raj Modi is an independent management consultant advising the healthcare sector on commercial strategy and investments.
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