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Healthcare – the balance of risk and opportunity

07/04/2020

Never has the healthcare industry been in the spotlight to such an extent and rarely has the interaction between the public and private sectors been so constructive and collaborative.

What factors have evolved in the last few days and what might the future hold for this industry, so often one that the user doesn’t really want to think about until it becomes a necessity? 

To set the scene the UK Healthcare market contributed £191.7 billion to UK GDP in 2016 according to the Office for National Statistics.

Will COVID-19 move the debate about Healthcare and its crucial economic impact beyond a simplistic debate focussed on the NHS and social care funding?

As will be shown below, there is potential for a new era of partnership between the NHS and its private sector counterparts. 

Private Hospitals

The vast bulk of hospital provision in the UK is within the NHS. Private hospitals operate with a blend of NHS overflow work, health insurance referrals and self-pay procedures.

Private hospitals have now been requisitioned by the NHS as overflow capacity. We understand that these businesses are still at liberty to perform procedures for the self pay market or insurers but the NHS work, contractually, takes priority. 

There are numerous examples of:

  • Care home occupancy increasing as the NHS frees up capacity by rapidly ‘un-blocking’ beds. 

  • The NHS and Local Authorities contracting directly with care home owners so that individual beds, or wings, or entire care homes can be used for COVID-19 recuperation. 
  • In short, the care continuum is being used far more effectively across the market and the change has happened at pace. There is every reason why this interaction between acute and social care should continue in a post COVID-19 environment. 
  • Operationally, of course the risk of a catastrophic infection at any given home is unavoidable, although these businesses are used to dealing with infection control generally. At least this can be balanced against a backdrop of some increased occupancy. 

 

Staffing

Care home providers report ongoing concerns regarding staffing levels caused by illness, or self isolation, which are largely beyond their control. 

In contrast, some operators report a surge in applications for employment, which is a trend that is often repeated in times of economic downturn.

Whilst the national shortage of nurses will not be eased in the short term, an absence of employment opportunities for non-qualified staff in retail, leisure and hospitality sectors is assisting care home providers fill vacancies.

In the meantime, capacity is also being increased via the “Nightingale Hospital” initiative. The ExCeL London has been transformed in less than a fortnight, with 4,000 new hospital beds due to open imminently.

There are operational challenges for the private hospital groups. They will have to ensure appropriate separation between COVID-19 patients and other patients for obvious reasons.

Not all of private hospital staff will be familiar with working practises from the NHS and some adaptability will be necessary.

Private hospitals may not have the same level of equipment that is found in NHS facilities. However, these issues are not intractable. 

The collaboration between the NHS and the private sector appears to be wholly pragmatic. As one hospital provider advised “we had 10 ventilators, previously unused, that are now suitably deployed”. 

 

Care Homes

Occupancy and revenue: For long enough the acute care industry (i.e. hospitals and associated facilities) and the social care market (predominantly care homes) have not operated in tandem. Is this finally changing and will that change be lasting?

The benefit to the operator is a potential reduction in agency staff costs and with total staff costs typically over 50% of revenue, there is potential for a material saving in operating costs. 

A peak before a trough? 

If there is some benefit in the short term for occupancy and possibly also staffing cost, is there a corresponding disadvantage when life returns to a new normal?

Care homes are a needs’ driven industry and demographic drivers for the market will not change substantially in a post COVID-19 world.

However, there may still be a need for some adjustment in a post COVID-19 world where block contracts are terminated and unqualified staff go back to work in other sectors.

Care in the future? 

The NHS ‘digital revolution’ has long been promoted as the key to futureproofing health services in the face of rising patient demand.

Unsurprisingly, there is an urgent requirement to move quickly towards greater use of digital technology such as an online doctor, or remote vital signs monitoring for proactive healthcare.

The impact of the digital and healthcare revolution on real estate is profound. Would you like your diagnosis to be made by artificial intelligence? Perhaps that is a question for another day.

 

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