Executive Summary :

The UK private healthcare market has emerged and evolved in the shadow of the most comprehensive   public healthcare system in the developed world — the NHS. Traditionally, the private sector was   formed to complement, rather than compete with, the NHS by allowing patients to avoid waiting lists  for elective surgery. Later on, the private sector offered services for those areas with limited or no provision under the NHS, such as abortion, fertility treatments and cosmetic surgery. The majority of this private care was paid for through private medical insurance (PMI) policies taken out by individuals or by companies on behalf of employees. Growth in the industry has traditionally been hampered by public loyalty and affection for the NHS.

However, over the past 2 decades in particular, the NHS has come under increasing pressure through rising demand, fuelled by a demographically ageing population, together with growing costs, driven by technological advancements that expand the scope and range of treatment possibilities. The costs of the NHS have risen far beyond any predictions that might have been made when it was founded in 1948, and successive governments have introduced wide and far-reaching reforms aimed at   controlling expenditure and improving efficiency.

One result of these many reforms has been the increasing and evolving partnership of the private   sector with the NHS, fostered by the Private Finance Initiative (PFI). The private sector has become a key provider of psychiatric services, counselling, substance-dependency clinics, specialist diagnostic services (such as Magnetic Resonance Imaging [MRI]), drug screening, forensic services and, most recently, of primary-care services and surgical services to the NHS. The private sector has also been moving into the provision of more specialist services, such as cancer and cardiac care, as well as offering intensive care and high-dependency facilities.

Unlike many other European countries, there is no statutory requirement for healthcare insurance and the NHS is funded directly from general taxation, with no provision for opting out. These factors have effectively limited the private sector to those individuals opting for PMI in addition to the NHS, or to those who are willing and able to pay directly for treatment.

The private healthcare market comprises five major market sectors: long-term care, acute care, PMI, psychiatric care and primary care. Long-term care is the largest sector, representing an estimated  47.7% of the total market in 2006. Key Note estimates that, in 2006, the total UK private healthcare market was worth £20.1bn, accounting for 21% of all UK healthcare expenditure.

BUPA is the largest operator in the private healthcare market. The company is both a provider and an insurer in a marketplace that is becoming increasingly competitive and polarised. The private  healthcare market is dominated by a number of very large, and increasingly international, players.

Ongoing funding problems in the NHS are likely to continue driving a proliferation in public-private partnerships (PPPs) into new areas. However, funding problems in the long-term care market are   likely to significantly hamper growth in this sector, despite the increasing need for services. Key Note forecasts that, between 2007 and 2011, the total UK private healthcare market will grow by between 6.5% and 7.7% year-on-year. The market is currently highly concentrated in London and the southern Home Counties, although this is likely to change as more partnerships evolve.