Executive Summary

The UK market for private healthcare has emerged in the shadow of the largest public healthcare service in the world, the National Health Service (NHS). The existence of, and enduring public loyalty to, the NHS, coupled with its funding through general taxation, has significantly affected the development and growth of the private healthcare market. In 2001, the total market for private healthcare, including insurance, was estimated to be £15.82bn, having grown by 20.4% between 1997 and 2001.

However, throughout the 1990s, the NHS was in a state of near crisis, with funding problems, increasing waiting lists, a crumbling infrastructure and shortfalls in facilities. As a result, opportunities have arisen for the private sector to expand from its traditional role as a provider of niche services and routine elective surgery. The boundaries between the public sector and the private sector are falling. Increasingly, the Private Finance Initiative (PFI) (introduced by the Government in 1992 to attract investment from the private sector) is being used to fund new facilities and to provide services directly to the NHS.

Although the private-healthcare market is growing, there are still many difficulties, particularly in long-term care, its largest single sector. Although there is potentially a growing demand in this sector, fuelled by the demographics of an ageing population, funding problems, coupled with increasingly costly regulation, are affecting growth in the market. Other sectors, most notably psychiatric care and, to a lesser extent, acute care, are showing buoyant rates of growth.

Companies operating in the private-healthcare marketplace have become increasingly competitive and there has been some consolidation. Companies are expanding through acquisition, and most market sectors are increasingly dominated by a few very large companies, with increasingly diversified provider and purchaser interests in a broad range of market sectors. Using these strategies, the larger companies are competing successfully with the NHS private sector. However, because of the lack of a national healthcare insurance scheme, funding for private healthcare is still largely dependent on the private-healthcare insurance companies and their corporate and private individual subscribers.

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