Pay as you go

With NHS waiting lists falling, is there still demand for a self-pay market? Sam Barrett reports

After several years of strong growth in the self-pay market, paying for your own medical treatment appears to be losing some of its appeal. According to Laing & Buisson, after the £150m cosmetic surgery spend was deducted, £385m was spent on self-pay healthcare in 2006, just £5m more than was spent in the previous year.

Several reasons are behind this, with improvements in the NHS the most significant.

“There’s less waiting on the NHS now and the self-pay market was always going to be the area that was most affected if this happened,” says Philip Blackburn, senior economist at Laing & Buisson.

The news is not totally bleak for the hospitals though. While the demand for medical treatment is slowing, there has been a sharp rise in the amount spent on cosmetic surgery. This rose by 15% in 2006, up from £130,000.

“The increase in spend is coming from areas that the NHS doesn’t cover, such as cosmetic and bariatric [obesity-related] surgery,” Blackburn adds.

Increased awareness of medical insurance options could also be contributing to the slowdown.

Howard Hughes, sales and marketing manager at insurer BCWA, explains: “The use of large excesses and co-insurance and the availability of more cut-down products mean the distinction between insurance and self-pay is blurring. These styles of products mean there’s an element of self-pay but with some of the risk removed by insurance.”


But, while demand is slowing there are still valid reasons for seeking private treatment. Research by BUPA found that the number one reason for buying medical insurance was access to clean hospitals, with MRSA and general hospital hygiene top concerns. Clearly this is a factor that also holds true for people paying to go private.

Sometimes even medical insurance policyholders may wish to pay for their own treatment.

Jan Lawson, managing director of specialist intermediaries the Private Healthcare Partnership (PHP), explains: “If someone has an exclusion on their medical insurance or the treatment they require isn’t covered by their insurer they may still prefer to pay for their own treatment rather than use the NHS.

“We also get enquiries about medical insurance from people who already need treatment. In these cases it’s too late to take out insurance but now that we have Medical Care Direct we can refer them for a self-pay deal. This allows us to service another part of the private healthcare market.”

Looking after these groups of people was one of the reasons the PHP acquired self-pay specialists Medical Care Direct this April. The service, which has been running since 2001, sources the best self-pay deals for its members, who currently pay a registration fee of £27 a year. On top of this it takes a small cut when negotiating treatment for clients by marking up the price.

However, Lawson maintains that users get a better deal than going direct.


“We arrange an inclusive package covering all the treatment required including any after-care. Some hospitals do offer fixed price packages direct to the public but it’s not always the case. Additionally, because we’re negotiating each course of treatment individually we can often get a better deal than an insurer who has to negotiate across the board pricing,” says Lawson. “This is especially the case where our customers can be flexible about when and where they are treated.”

Many of the hospital groups do offer inclusive package prices to attract self-pay business. For instance, Spire Healthcare, Nuffield Hospitals and Ramsay Health Care are among those with guaranteed deals, where the price is set regardless of any complications or additional treatment that may be required. Additionally, it is possible to arrange loans through the hospitals to cover treatment. For example, Nuffield provides interest free and fixed interest loans through Clydesdale Financial Services and Spire arranges its loans through First Medical Loans.

As well as appealing to people who are happy to pay to go private and to those who cannot get cover under their medical insurance, self-pay sourcing tools also have an important role to play in the corporate market. The rise of the medical expenses trust, now accounting for around a third of healthcare provision in the corporate sector, will also mean opportunities for this type of service.

“There are a lot of medical expenses trusts and uninsured benevolence funds that are required to source the best deals for members when they need treatment,” adds Lawson.

Mike Blake, group sales manager for the PMI Health Group, also sees opportunities in the self-pay market.

“Older people might be better off considering self-pay. Medical insurance premiums can be very expensive when someone reaches their 60s so it may be better to save the money and pay as you go instead. If they do require more expensive treatment they can fall back onto the NHS,” he explains.

But while Blake and Lawson are happy to accept self-pay for certain types of customer, BCWA’s Hughes is adamant that there has never been a better time to buy insurance.

“How easy is it to arrange a loan for treatment when there’s a credit crunch?” he asks. “There’s never been a better time to take out an individual medical insurance policy. If you’re planning to pay as you go, the risk of facing a large bill is too great.”

For example, according to a 65-year-old man living in London would pay between £85 and £341 a month for a fully comprehensive plan with no excess. Reduce the level of cover and add in a £5,000 excess, and premiums fall as low as £31.47 a month with WPA’s XS Health.


But while this type of high excess product does offer peace of mind that big-ticket bills are taken care of, self-pay deals could become more common. The last few years have seen something of a shake-up in the private hospital sector with new players coming into the market. Many of these are backed by private equity firms – for instance Cinven is behind Spire Healthcare – which will be keen to turn a profit. This could see greater competition for business with the emergence of more deals for self-pay customers.

Source: Nuffield Hospitals
1. Cosmetic surgery
2. Obesity surgery
3. Hip replacement
4. Knee replacement
5. Assisted conception (fertility treatment)
Source: Spire Healthcare
Cataract removal £1,625 - £3,075
Coronary angioplasty £8,375 - £11,500
Cruciate ligament repair £3,500 - £6,100
Hernia repair £1,575 - £3,600
Hip replacement £7,800 - £9,775
Knee replacement £8,850 - £11,125
Mastectomy £3,275 - £4,950
Tonsillectomy £1,575 - £2,250
Varicose vein surgery (one leg) £1,575 - £2,200
Wisdom teeth extraction £1,350 - £1,625

However, revenue generated from patients paying their own bills is only a small part of the private hospitals’ income stream. According to Laing & Buisson’s figures, the £535m self-pay income stream in 2006 was less than a third of the revenue generated by its main earner, medical insurance claims.

Further, with revenue from the NHS likely to increase, from 2006’s £430m to between £750m and £900m, self-pay could become even less important to private hospitals.

Blackburn suspects it has seen its heyday but is far from prepared to write the self-pay market off.

“It’s unlikely to go back to the days of people jumping long NHS waiting lists but demand will keep steadily growing, especially for cosmetic and bariatric surgery,” he says. “New technology and a widening range of treatment options will ensure people continue to look to the private sector for their healthcare.”

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