Private hospitals hit as fewer pay for cover

The number of subscribers to private medical insurance dipped last year, with more private hospital beds closing than opening for the first time in a decade.

Despite the presence of conditions necessary for renewed growth in private health cover, 1995 remained essentially flat, figures published in Laing's Review of Private Healthcare, the annual "Bible" of the private health care industry, show.

And the National Health Service is continuing to take private patient business away from private hospitals, with National Health Service paybeds increasing their share of the market last year to an estimated 15.1 per cent, against a little over 11 per cent in 1988. Some 6.5 million people, or around 11 per cent of the population, are covered for private medical treatment. But that figure has remained unchanged for five years.

Despite the market remaining in the doldrums, premiums continued to rise faster than inflation, at 2 per cent above the retail price index, and look set to continue to do so for the rest of the decade, the review says.

After 10 years in which the number of private hospital beds grew by between 100 and 300 a year, the total fell last year for the first time in a decade, down by 471 as four private hospitals closed and only one opened. At the same time the number of dedicated NHS paybed units rose by three to 77.

Between them, these account for the bulk of NHS private patient activity and rival in size the biggest private hospital groups, providing 1,400 beds against Bupa's 1,700, General Healthcare's 1,540 and Nuffield Hospitals' 1,450 beds.

The proportion of elective operations paid for privately has also fallen. This is partly due to the Government's drive since 1991 to cut NHS waiting lists and waiting times, which has increased the number of elective operations performed by the NHS. While privately paid-for operations in both the NHS and private hospitals rose sharply, the increase in ordinary NHS activity has been even greater, so that privately funded surgery accounted for just under 13.5 per cent of all elective procedures in England and Wales in 1992/93, the last year for which full figures are available, against almost 15 per cent in 1986.

The improved efficiency of the NHS means that during the Nineties "the NHS has been challenging one of the key selling points of private medical insurance", the review says. It adds, however, that while this offers "a potential threat" to private cover, there is no reason to suppose that the NHS will seriously undermine the demand for private medical insurance.

Further independent hospital closures are, however, likely as the big insurers develop "preferred provider" networks. These limit the hospitals which can be used by those covered by some of their schemes. Despite the flat market, renewed growth in private medical insurance cannot be long delayed, William Laing, the review's editor, said. "Just like the housing market, the conditions for recovery have been in place for some time and look set to continue to be so as disposable income rises, as middle- management 'downsizing' runs its course and as the economy generally continues to grow."

Projections of future growth have, however, been revised downwards. Mr Laing now expects some 8.3 million people, or 14 per cent of the population, to have at least some private health cover by the year 2000, against a projection of well over 9 million people, or 15.5 per cent of the population, made last year.

t Laing's Review of Private Healthcare 1996; 0171-284-1268; pounds 130