The decision to commission another 250,000 operations a year from the private sector, and to buy in several hundred million pounds a year of diagnostics, has settled an internal argument within the Department of Health.
One side argued that the health service needed more operations from the private sector to hit its waiting time targets. The other said it was only more diagnostic capacity that was needed, to shorten “hidden waits”: the time between seeing a doctor and getting the tests needed for a clear diagnosis.
The answer was to have both. What that will provide, according to Ken Anderson, the NHS commercial director, is a sustainable NHS market for the private sector that will still be attractive once the initial contracts for the first wave of independent treatment centres run out in five years’ time.
The two deals were likely to be worth “a little over £900m a year”. They will mean that the NHS market is worth between £1.3bn and £1.5bn a year to the independent sector.
Aside from potential entrants, the new contracts offer fresh opportunities for the overseas providers already here.
They include Netcare and Afrox from South Africa, the latter of which works with Care UK; Nations Healthcare and New York Presbyterian from the US; Anglo-Canadian Clinics, Birkdale and the US/UK Mercury consortium.
But it also opens up more business for Bupa, which is selling 10 smaller hospitals and restructuring its business to take a share of the NHS market.
Other potential beneficiaries include Nuffield Hospitals, which has a £50m contract to provide 17,000 operations this year and has just taken over Vanguard, the provider of mobile operating theatres, and the Swedish-owned Capio, which has said that it sees the NHS as a big part of its UK business. William Laing, of Laing and Buisson, the independent health sector analysts, said the move into diagnostics offered opportunities for the hospital groups, and for specialist diagnostic providers such as Alliance Medical, which took the recent MRI scans contract, Cardinal Inhealth and the Australian-owned The Doctors Laboratory.
Of the big four UK private hospital groups, only BMI has yet to show signs of redesigning its operations to take advantage of the emerging NHS market, in which the department is looking for operations provided at or around the NHS price.
The new contracts mean the number of NHS operations centrally contracted from the private sector will rise to about 470,000, with another 60,000 currently being bought by the NHS locally.
That 530,000 is almost 10 per cent of the 5.5m waiting-list type operations that the NHS in England buys annually.
Mr Anderson said the department had looked at France, Germany and other European countries where there was a mixed economy of provision to judge what size the market would have to be in order to be self-sustaining “what mix of small and large companies, and what opportunities there are for growth and for merger and acquisition”.