People claim the NHS isn’t there for them. . . that’s where we step in
More patients are funding their own private treatment rather than spend months on a waiting list, says the boss of Spire Healthcare
PATIENTS fed up with long NHS waiting lists are increasingly turning to the private sector and paying out of their own pocket for medical procedures, helping to boost UK-listed hospital provider Spire Healthcare, its chief executive has said.
Garry Watts, who took the helm in June from his previous role as chairman when former boss Rob Roger stepped down, said Spire’s self-pay division, in which patients fund their own medical procedures, increased sales by 10pc to £85.3m in the first six months of the year.
He said the division was an important part of the overall business and was likely to strengthen further. “Over the past four or five years we have seen mid to high single digit growth and that is partly down to the NHS struggling,” he said.
“But even if the NHS is performing to its targets, many people don’t want to spend 18 weeks on a waiting list and would rather pay to get into a private hospital sooner, at a time that suits them.
“Those aged 50 to 60 are increasingly of the view that the NHS is not there for them in the way that they would have ideally liked and are beginning to recognise that having an alternative is something that is acceptable, provided it works and they understand what they are paying for.”
Spire, which runs 38 private hospitals, 12 clinics and two specialist cancer centres across England, Wales and Scotland, has spent a great deal of money investing in brand awareness and implementing a fixed pricing system, so that clients know exactly what a procedure will cost.
“That has made a huge difference,” Mr Watts said.
“At the end of your first consultation the price is firmed up so you know exactly what you are in for.
“You are no longer struck by the thought that you may have to remortgage your house as soon as you move through reception.”
He made the comments as the hospital group unveiled interim results which showed capital spending nearly doubled to £71.9m in the six months to June 30, as Spire built two hospitals in Manchester and Nottingham, due to come on stream in the first quarter of 2017, and expanded existing hospitals with additional operating theatres and wards.
“We are investing all the cash we generate this year, and that is for a combination of things, including maintaining the estate, expanding capacity in existing hospitals and building new hospitals,” said finance director Simon Gordon, adding that Spire was “committed” to continue to build new hospitals, provided there was demand for it.
The company has been eyeing the lucrative central London market for some time, but the European Union referendum has left the London commercial property market “pretty static”, Mr Watts said, which meant progress has been slower than he had hoped.
“London is still very much on the agenda, but we have to recognise the market reality, which means there will be nothing in the short-term. In meantime we will exploit what we have got around London, in Cheam, Bushy, Gatwick and Brentford.”
Analysts at JP Morgan Cazenove said they believe one of the few potential impacts of Brexit on Spire is that it “potentially helps on pricing negotiations or brings up alternative sites if the London property market continues to stall”.
Spire’s revenues rose 4pc to £469.5m in the first half of the year – beating analyst forecasts – while pre-tax profits soared 17pc to £46m as the hospital provider kept a tight lid on costs.
David Cox, a healthcare analyst at Panmure Gordon, said: “All in all, solid results from a company that is well positioned to exploit the NHS’s many needs and failings.”
The company generates 30pc of annual sales from work it carries out on behalf of the NHS, which Mr Watts said is “not an accident, but our strategy, we want to be seen as a solution to healthcare in the UK, not just use the NHS to fill some blank spots in our theatre spaces”.
Sales generated by the NHS division rose 8pc in the half year, as a 12pc decline in contract work, in which Spire carries out procedures – mostly orthopaedic – on behalf of the NHS, was offset by an 18pc rise in NHS patients using the e-referral system, previously known as “choose and book”, in which patients can decide which hospital they want to use.
“The reason for this is because the Government and NHS’s promotion of choice is beginning to resonate with GPs, who are a key part of this process,” Mr Watts said.
“The way it actually works is that GPs are supposed to offer patients a choice of hospitals and the system throws up availability and we work hard to make sure we have available slots and build awareness of our brand in the community.
“This service has been around since 2007 but it used to be really cumbersome and is now more user-friendly.”
Given that e-referrals are growing, Mr Watts said Spire would increasingly move towards e-referrals and away from contracting work, which can be unpredictable – last year Spire got badly burned after a number of clinical commissioning groups cancelled contracts.
Spire, which was floated in June 2014 by private equity firm Cinven for £842m, is part-owned by South Africa’s Mediclinic International, which bought a 29.9pc stake in the business for £432m last year.
Analysts have long speculated that Mediclinic, which recently completed a merger with UK-listed Al Noor Hospitals, will launch a complete takeover at some point and rumours were circulating this week about a potential acquisition. But Mr Watts said not to “read emphatically” into rumours or speculation.
Shares in Spire rallied 2.7pc to 352.4p on the back of the results.
‘You no longer think you may have to remortgage the house as soon as you move through reception’