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
LIST OF TABLESLIST OF FIGURESEXECUTIVE SUMMARY AND REPORT HIGHLIGHTS
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