The UK’s healthcare landscape is facing significant challenges, with NHS trust budgets and government finances under increasing strain.
However, this challenging environment also presents an opportunity for NHS trusts to explore new ways of maximising their resources and expertise to generate vital new revenue streams.
One such opportunity lies in the expansion of private patient units (PPUs) within NHS hospitals.
PPUs offer a unique proposition – they allow NHS trusts to leverage their world-class clinical expertise and facilities to provide high-quality private healthcare services, while reinvesting any surplus revenue back into the broader NHS operation.
In a climate of tight budgets and growing demand for healthcare, this dual benefit is increasingly appealing.
In 2019, PPUs generated £634m of revenue, giving them an overall 14% of the private patient market. A 2022 report by Latchmore Healthcare Associates identified more than £500m of potential private care outside London that is treated in the NHS each year, due to most smaller private hospitals outside London having facilities for high acuity or high complexity treatment.
PPUs are ideally placed to serve the high acuity and complexity segment of the market as they can share resources with NHS services. As the NHS is already treating these individuals as NHS patients, providing a private pathway would mean payment from insurers for work they are doing anyway, and effectively very high margins.
Even with Chancellor Rachel Reeves injecting £22.6bn into the NHS over the next two years, as announced in the Autumn Budget, there is acknowledgement this short-term support must be complemented by long-term reform.
Generating new income streams will be a key part of the solution, yet many trusts have experienced significant challenges in expanding their PPUs – with barriers ranging from the financial and physical to structural and ideological.
These issues and other strategic considerations were discussed during a recent roundtable event hosted by Browne Jacobson, which brought together NHS PPU managers, commercial directors and other sector experts.
The potential of PPUs
PPUs usually operate within or alongside NHS hospitals, offering private healthcare services to patients who are willing to pay.
Beyond financial gains for the NHS, PPUs can lead to improved patient care standards, as the influx of resources often funds state-of-the-art equipment and facilities that benefit all patients.
Across the UK, there are already several examples of NHS trusts that have successfully established or expanded their PPUs.
The partnership between University Hospitals Birmingham NHS Foundation Trust and HCA Healthcare UK to develop the Harborne Hospital is a prime example. By combining the NHS trust’s clinical excellence with HCA’s private healthcare expertise, the Harborne Hospital has become a beacon of high-quality private care, while generating valuable revenue to support NHS services.
Similarly, the Royal United Hospitals Bath NHS Foundation Trust’s acquisition of the Sulis Hospital has allowed the trust to expand its private patient offering and reach new patient cohorts, all while maintaining its commitment to NHS care.
Other good examples can be found at The Royal Marsden NHS Foundation Trust, which has used its PPU to fund pioneering cancer research and treatments that serve both private and NHS patients, and Moorfields Eye Hospital NHS Foundation Trust, whose additional income from its PPU has been leveraged to facilitate advancements in eye care that have set new standards in ophthalmology.
These success stories demonstrate the tangible benefits that PPU expansion can bring – not just in terms of improved financial performance, but also in enhancing patient choice, supporting recruitment and retention of top clinical talent, and driving innovation.
Navigating the opportunities and challenges
Demand for private healthcare has grown since the Covid-19 pandemic, with health data provider LaingBuisson, stating that the UK private healthcare market has risen year-on-year by £1bn to a record £12.4bn in 2023.
This is being fuelled by NHS backlogs and waiting lists – which peaked at 7.7 million in September 2023, up sharply from 4.57 million at the end of 2019.
For those with a separate ringfenced facility for private patients, they can also release space for NHS patients, creating a win-win scenario.
PPUs can be particularly beneficial in areas outside London, where smaller populations mean demand for specialised private services isn’t necessarily as strong. The ability for a private provider to partner with an NHS hospital in such locations is often a more viable option than opening their own hospital.
Yet many of our roundtable participants acknowledged that Covid had put a spanner in the works for PPU expansion by affecting capacity, bandwidth and resources.
Financial instability has delayed capital works projects, while shortages of beds and a lack of ringfenced theatre space is viewed as a significant challenge, with overspill leading many hospitals to accommodate private and NHS patients in the same wards.
This leads us to the ideological hurdles associated with the NHS providing private healthcare, which can complicate buy-in from hospital boards. Some boards are understandably reluctant to ringfence beds, theatres and timeslots exclusively for private patients when NHS waiting lists are so lengthy.
Others are sensitive to opposition arguments that the NHS should focus on its core activity of treating NHS patients, rather than risking public money by competing with commercially-driven private activity.
Navigating the commercial and legal frameworks can also prove challenging. Careful planning and a proactive approach to risk management is therefore essential to overcoming these hurdles.
Practical considerations for PPU expansion
For NHS trusts and independent healthcare providers alike, there are several practical factors to consider when exploring PPU expansion or creation.
From a legal perspective, a range of options are available, ranging from a trust running its own unit, to creating a wholly-owned subsidiary that runs the private operation separately, and then to partnerships such as joint ventures or other arrangements with private sector partners. Each approach brings its own advantages and disadvantages in terms of control, risk and revenue- sharing.
Securing the necessary capital for new facilities or expansions is critical. Trusts will need to evaluate different financing models, including joint ventures, acquisitions and collaborations with private providers.
There is also an important communications and stakeholder engagement exercise to plan. Gaining buy-in from hospital boards, clinicians and the local community will be vital.
Trusts must clearly articulate the strategic vision and potential benefits of PPU expansion to secure this support, as well as deploying careful change management to navigate any cultural and ideological hurdles. Private sector partners that are involved have a key supportive role to play here.
By addressing these practical considerations head-on, NHS trusts and independent providers can unlock the significant potential of PPU expansion, delivering high-quality private care while generating vital new revenue streams to support the broader healthcare system.
