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Mental Health UK Market Report

  • Report

  • 253 Pages
  • September 2019
  • Region: United Kingdom
  • LaingBuisson
  • ID: 5010752

The fourth edition of the Mental Health Hospitals UK market report is essential reading for providers, investors, advisors, financiers, commissioners and anyone with an interest in this dynamic market. The UK market for independent mental health hospitals as a whole grew by 4.1% in calendar 2018, and with the NHS funding 90% of places, the 5+% yearly growth foreseen by the NHS funding settlement suggest the market value may be as much as £2.3 billion by 2023.

The market remains highly consolidated, with 65% in the hands of the top four providers. In a market where margins have been squeezed during the years of austerity, it stands to reason that those with the greater bargaining power in the face of monopsony NHS purchasers and also national market knowledge and relationships have fared better. The ability to spread the cost of service development has also enabled larger groups to develop leading-edge specialist programmes.

While the NHS has put an end to the four-decade trend to reducing its in-house capacity, specialism continues to offer the independent sector a way to differentiate itself. NHS Mental Health Trusts still seem reluctant to invest in specialised services, which would require them to attract patients from beyond their boarders, preferring instead to provide a broad service range to meet the overall needs of their local population.

However, this means that there is an unequal distribution of specialist facilities throughout the country, meaning that some patients have to travel long distances to receive appropriate treatment. The report considers how the independent sector may be affected by NHS England’s plans to eliminate out of area placements by 2020/21.

Prevalence and greater recognition of mental illness are not market drivers in of themselves. However, the greater priority being given to mental health in line with the objective of ‘parity of esteem’ and the funding that follows from this is. Limits on NHS capital budgets make it unlikely that the NHS will be able to provide significant growth in in-patient care, though it dominates community-based services and these are likely to be the recipients of any additional targeted spending. Independent providers seeking to grow through diversification would be well advised to consider the larger adults specialist care home space.

The report shows a picture of a market which is enjoying strong growth and is likely to continue to growth strongly as its main payor, the NHS, will see a 5+% yearly uplift through its funding settlement, and mental health is benefiting from ‘parity of esteem’ with physical health as a result of a shift in cultural and political attitudes.

Key findings include:

  • The market for independent mental health hospitals grew by 4.1% in calendar 2018 taking its total value to £1.8 billion.
  • The main payor remains the NHS, which accounts for 90% of the market, with private payors (self-pay and private medical insurance) only accounting for 10%. A third of the NHS’s share is central commissioning by NHS England, meaning providers have a significant monopsony purchaser to negotiate with.
  • Specialisation remains the independent sector’s main strength and its main way to counter any risk that the NHS increases its in-patient mental health capacity. Local NHS trusts still appear to prefer to set up services that serve the broad needs of their local populations rather than invest in specialised services.
  • Profitability in the sector is satisfactory, though it is far lower than before the global credit crisis and, with the public sector being the dominant payor, has suffered from the UK government’s austerity policy. It is hoped that profitability will grow as financial pressures on the NHS ease.
  • Demand in the independent sector remains subject to longer-term ebb and flow in NHS commissioning as commissioners prefer in-house NHS provision. However, so long as independent hospitals are perceived as offering value for money, there remains scope for them to increase their share of the mental health in-patient market.
  • Those providers looking to expand their offering in mental health would be advised to consider the adult specialist care home market.

The report includes:

  • Market size and growth
  • Market structure
  • Demand and supply
  • Business models
  • History, politics and regulators
  • Payors
  • Profiles of Major Providers
  • Investors
  • Market potential
  • Financial Appendix

Who is the report for:

  • Independent mental health hospital providers
  • Community health providers
  • Adult specialist care providers
  • NHS commissioners
  • Banks
  • Private equity investors
  • Lawyers
  • Management consultants

Table of Contents

1.1 Market definition
1.1.1 Mental health hospitals
1.1.2 Community mental health services
1.1.3 Elements of mental health services not covered by this report
1.1.4 Data sources
1.2 Market size
1.3 Market size trends
1.3.1 Independent sector growth - historic
1.3.2 Independent sector growth - future projections
1.3.3 Independent sector capacity stable and occupancy generally strong
1.3.4 Context - decline in capacity and volume of demand across independent sector and NHS combined Capacity Occupied beds
1.4 Funding - by payor type
1.5 Segmentation by security level and patient type
1.5.1 Results of LaingBuisson's 2018 survey of independent mental health hospitals Breakdown of capacity by security level Breakdown of capacity by patient type Market concentration by security level
1.5.2 Secure mental health hospital treatment High Secure Medium Secure Low Secure and Psychiatric Intensive Care Units (PICUs) Historic trends in secure provision (medium, low and PICU combined) Regional variations in secure provision (medium, low and PICU combined) Secure services occupancy rates
1.5.2. 7 Market dynamics - risks to secure providers arising from monopsony purchasing power of the NHS
1.5.3 Children's and Adolescents' Mental Health Services (CAMHS) 39 Historic trends in CAMHS Tier 4 provision Regional differences in CAMHS Tier 4 provision CAMHS occupancy rates Major providers and market concentration in Tier 4 CAM HS Market dynamics - risks to CAM HS providers arising from monopsony purchasing power of the NHS
1.5.4 Eating disorders (adult)
1.5.5 Neuro-rehabilitation Causes of ABI and underlying demand Patient pathway Historic trends and regional variations in neuro-rehabilitation capacity Brain injury unit occupancy rates Brain injury market segmentation by value Major independent sector providers of brain injury services in residential settings Market concentration Sources of funding Market dynamics
1.5.6 Substance misuse rehabilitation Market value of substance misuse rehabilitation in residential settings Market value of substance misuse rehabilitation in non-residential settings Substance misuse capacity in hospitals Substance misuse capacity within independent sector care homes and residential substance misuse rehabilitation services Sources of funding for substance misuse rehabilitation Major independent sector providers of substance misuse rehabilitation in residential settings Public sector funding of substance misuse programmes
1.5. 7 Open acute adult general psychiatry
1.5.8 Learning disabilities and autism Market size and independent sector share Hospital provision for learning disabilities/autism is a declining and threatened sector
1.5.9 Locked rehab
1.5.10 All other non-secure and step-down mental health hospitals
1.6 Demand drivers
1.6.1 Fundamental demand drivers 64 Prevalence of mental illness Demography Fear Growing recognition of mental illnesses NHS funding - priority given to mental health
1.6.2 Drivers of NHS outsourcing Outsourcing may be at risk from NHS efficiency drives Out of Area Placements (OAPs) NHS in-house capacity - will it continue its long-term declining trend? Price Level playing field for independent and public sector players?
1.6.3 Drivers of private demand (PMI, self-pay and other) PMI Self-pay and 'other'
1.7 Demand and supply
1.8 Key operational statistics
1.8.1 Occupancy rates in independent mental health hospitals
1.8.2 Fees in independent mental health hospitals
1.9 Business models - strengths and weaknesses
1.9.1 Asset heavy business model
1.9.2 Variations in business models
1.9.3 Diversification into adult specialist care
1.10 Performance measures
1.10.1 Financial performance - underlying profitability Margin pressure on mental health hospitals less severe than for care homes
1.10.2 Quality performance - CQC ratings
1.11 Community mental health services
1.11.1 Scale of the community based mental health services sector Expenditure on community mental health services
1.11.2 NHS prime focus on community mental health services
1.11.3 Current extent of outsourcing of community mental health services Outsourcing very limited Reasons for limited outsourcing of NHS community mental health services Evidence of limited outsourcing from MHSDS returns
1.11.4 Improving access to psychological therapies (IAPT): an NHS priority Critics of the IAPT programme Unit costs of IAPT NHS in-house and independent sector market shares of IAPT
1.11.5 Other talking therapy programmes
1.11.6 PMI extends reimbursement to non-consultant led services
2.1 History of independent mental health services in the UK
2.2 National policies
2.2.1 Political attitudes to outsourcing, competition and 'marketisation' of the NHS From 'Old' to New Labour 1997-2002 Patient Choice, Provider Plurality and Payment by Results 2002-2007 Threat of a step backwards - 'NHS as preferred provider' mooted 2007-2010 Coalition government NHS reforms 2010-2015 Conservative administrations (May and Johnson) 2015-
2.2.2 Government policies regarding other mental health issues
2.3 Legislation
2.3.1 Mental Health Act 2007
2.3.2 Health and Social Care Act 2008 - creation of CQC and the current regulatory framework
2.3.3 Health and Social Care Act 2012 - he centrepiece of the Coalition government reforms Section 75 regulations on NHS procurement Level playing field 101
2.3.4 Scotland, Wales and Northern Ireland
2.4 Regulation of the independent mental health sector in England
2.4.1 From 'Essential' to 'Fundamental' standards of quality and safety, 2010- List of Fundamental Standards Enforcement of Fundamental Standards Ratings performance - evidence to date on Fundamental Standards 105 Regulatory risk - and how it can be minimised
2.4.2 Other regulations to which mental health hospital providers are subject
3.1 Payor breakdown and trends
3.1.1 NHS funding for mental health services NHS expenditure trends over the last decade Future funding prospects Parity of esteem
3.2 Public sector commissioners (the NHS)
3.2.1 Specialised mental health services commissioned by NHS England Light touch application of monopsony purchasing power by NHS England
3.2.2 Mental health commissioning by CCGs Out of area placements
3.2.3 Features common to centralised and local NHS mental health commissioning
3.2.4 NHS commissioning from independent sector more sophisticated than from in-house Trends in NHS commissioning from independent sector providers 'Lazy' NHS commissioning from NHS in-house providers
3.2.5 Rules governing tendering of NHS clinical services to independent sector providers Absence of NHS outsourcing of community-based mental health services Rationale for outsourcing - relative costs of NHS and independent sector providers Competition and partnership opportunities with NHS providers
3.2.6 Summary of market dynamics for NHS paid mental health hospital services
3.3 PMI and company paid medical expenses schemes
3.4 Self pay
4.1 Market concentration and group penetration
4.1.1 Market concentration and penetration in mental health hospitals
4.2 Consolidation
4.2.1 Competition and Markets Authority oversight
4.3 Exits and entries
4.3.1 At the group level
4.3.2 At the establishment level
4.4 Business failures and recapitalisations
4.4.1 Care Principles
4.4.2 Castlebeck Group
4.4.3 St Lukes Healthcare
4.4.4 Raphael Hospital
4.5 Age and quality of stock
4.6 Segmentation by provider type
4. 7 Sources of capital
4.8 Economies of scale and scope
4.9 Barriers to entry
4.10 Brands
4.11 Major provider profiles
4.11.1 Cygnet Health Care Ltd
4.11.2 Elysium Healthcare
4.11.3 Four Seasons Health Care (Huntercombe Group division)
4.11.4 Priory Group (healthcare division)
4.11.5 St Andrew's Healthcare
5.1 Major investors and their UK mental health holdings
5.2 Mergers and acquisitions, deal values and enterprise value multiples
5.2.1 Exit multiples Exit multiples over the past three years from 2014 Exit multiples before and after the global credit crisis and up to 2014