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21.08.15

NHS budget hole means flat revenue for private provider for 2015

Private medical provider Spire Healthcare says plans to cut the multi-billion pound deficit in the NHS will cause its full-year revenue to flatline.

The provider, which operates 39 hospitals across the country, also blamed its reduced profit this year on the health service’s funding crisis, which led to a drop in referral to private services.

Its half-year interim results report said there were “clear signs” that Monitor’s letter to NHS trusts in early August had reduced the flow of cases from public to private.

Spire had originally predicted “low double digit” revenue growth in the NHS during the first half of 2015, followed by single digit growth for the remainder of the year.

However, following the impact of the public deficit on Spire’s full-year performance, it has forecast flat NHS profit in the second half.

The private giant also predicted that patients will quickly ‘go private’ if the NHS continues to let waiting lists increase as a way to weaken the stress on its flatlining budget.

Rob Roger, Spire CEO, said: “Because of actions taken in response to the NHS trusts’ estimate of aggregate deficits for 2015-16, we recognise that there may be some near-term weakness in NHS demand over the remainder of this financial year.”

The report’s market trends show that the self-pay sector continues to grow as people “increasingly chose a private alternative over the NHS”, with recent cuts “cumulatively” impacting the rate of growth of their business in the NHS.

The recent blow refers to a letter from Monitor send to all trusts, seen by NHE, demanding that they only fill “essential” vacancies. It also suspended a series of fines and penalties tied to exhaustive waiting lists since the start of this financial year.

Furthermore, Spire said in its report that some CCGs have started referring patients to trusts, either through block contracts or by breaching their legal right to choose which hospital provider they want to be referred to.

However, Roger expects that, despite the slowing growth of Spire’s NHS business in the short term, the firm is likely to benefit in the medium-to-long term.

He said: “We are confident that in the medium-to-long term, trends in this business remain very positive for Spire and that, when combined with our growing strength in PMI (private medical insurance) and self-pay, the opportunity to deliver value to shareholders remains compelling.”

According to the company, this will probably come about through a greater NHS dependency on the private sector due to expanding waiting lists.

It also outlined the possibility of the government allowing waiting lists to continue to grow to alleviate budgetary pressures, “in which case, over time, we would expect much of this work to come back to us in the form of PMI or self-pay patients”.

Despite the public service’s blow on the firm’s business, Spire reaped the benefits of a reasonably profitable half-year.

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