Trend 2. Private providers are increasingly part of the solution to provide quality healthcare at high productivity
While the share of private healthcare provision varies in different markets, in recent years, Western European healthcare systems have evolved, providing a favorable outlook for private providers. Capio experiences that the key market trends have created opportunities for private healthcare providers, as they have historically been better able to adapt to the changing environment. In view of the increasing demand for healthcare services and increasing pressure on healthcare budgets, private providers are seen by governments as part of the solution to relieve the pressure from an increase in healthcare expenditure. This is due to their perceived high quality and high productivity offering, which is increasingly attractive to both payers and patients, who also benefit from reduced waiting times. For example, in Stockholm, the share of patients waiting more than 90 days for hip or knee prosthesis surgery fell from 16% in 2010 to 3% in 2014,1 which could be linked to an increase in private provision.
Private providers still represent a small part of the overall market at approximately 13% of the addressable market in Sweden, 6% in Norway, 23% in France and 16% in Germany, in 2013.2 There are generally two primary means by which the public system can shift volumes to private providers: tendered contracts or the implementation of free patient choice, with the latter being expected by Capio to continue or to become more prevalent in the Group’s markets. Going forward, the share of healthcare services provided by private providers in Europe is expected by Capio to increase, with the following potential benefits:
- Lower unit price: Private providers offer a lower unit price for healthcare based on the combination of contracts awarded through competitive bidding and centrally-determined patient choice reimbursement levels. Healthcare systems are expected to increase the volumes shifted to private providers, as private providers are well positioned to provide quality healthcare with high productivity and at a lower cost than public providers. For example, introducing care choice in Stockholm for hip and knee replacements has resulted in a 17% decrease in cost per procedure between 2008 and 2011.
- Leveraging patient involvement: The implementation of patient choice creates an incentive for providers to improve quality (such as encouraging an improved quality/value offering or shorter waiting times). This creates an opportunity for private providers to attract elective (planned) volumes by developing competitive quality and value offerings
- Explicitly connecting reimbursement to quality: The publichealthcare systems are developing towards measuring and taking account of the quality of delivered healthcare, and ensuring the right incentives to drive quality improvements and apply modern, evidence-based medical methods. One element of this is to adapt reimbursement models so that they no longer impede quality improvements which can lead to shorter average lengths of stay and the transition from inpatient to outpatient care. For example, for certain procedures the French government has removed the borne basse, a system in France with minimum required lengths of stays for patients in hospital in order for the provider to receive full reimbursement. This positive development means that reimbursement levels better reflect the quality of care provided, and improve the transparency of actual quality delivered across providers
- Increased co-payments: Potential limitations to the public offering of healthcare due to longer waiting times are expected to stimulate an increase in privately financed healthcare, such as private health insurance and out-of-pocket expenditure, thereby affording private providers the opportunity to expand service offerings
- Co-investments in capacity: The use of public-private partnerships, and the shift of specific volumes of healthcare for which public providers lack capacity and private providers hold excess capacity, benefit both the public system and private providers, as the public system is expected to improve its access to ”free capacity” while private providers are expected to gain access to additional patient volumes
1 Swedish Association of Local Authorities and Regions (SKL) (Healthcare waiting times).
2 Source: SKL; Helsedirektoratet; Finans Norge ; DREES; Comptes de la santé ; Destatis (Federal Bureau of Statistics Germany); Hospital Rating Report Germany; Capio market studies