“Is private healthcare becoming more of a need than a want; a qualitative research into the...

“Is private healthcare becoming more of a need than a want; a qualitative research into the private healthcare market and its future role.”

2014

Ben Stevenson Student Number: 10275206

4/1/2014

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Contents Introduction ...................................................................................................................................... 4

Background to the Research .............................................................................................................. 4

Aim Statement .............................................................................................................................. 4

Research Questions ....................................................................................................................... 4

Literature Review .............................................................................................................................. 5

Introduction .................................................................................................................................. 5

Consumer Behaviour & Perception ................................................................................................ 5

Consumer Retention ...................................................................................................................... 6

Demand Factors for Private and Public Healthcare......................................................................... 6

Changes in the Private Insurance Market ....................................................................................... 8

Government Policies on Healthcare Provision ................................................................................ 8

Healthcare Provision in Competing Countries ................................................................................ 9

Conclusion ................................................................................................................................... 10

Methodology ................................................................................................................................... 11

Introduction ................................................................................................................................ 11

Research questions ...................................................................................................................... 11

Research Strategy ........................................................................................................................ 11

Source of Data ............................................................................................................................. 12

Why this Design ........................................................................................................................... 12

Meeting Research Objectives....................................................................................................... 13

Analysing the Data ....................................................................................................................... 13

Constraints and Problems ............................................................................................................ 13

Research ethics............................................................................................................................ 14

Results & Findings ........................................................................................................................... 15

RQ1: Has there been a change in the culture of the target market of private healthcare? What

factors have caused the change? ................................................................................................. 16

Declining NHS service .............................................................................................................. 16

Cost of private healthcare and the effect of the recession........................................................ 18

Still seen as a luxury product.................................................................................................... 20

Companies still value the product ............................................................................................ 21

RQ 2: What is the potential for future private healthcare market growth? ................................... 22

Making the product affordable ................................................................................................ 22

Innovation ............................................................................................................................... 22

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Working with not against the NHS ........................................................................................... 24

RQ 3: What factors will impact upon private healthcare market growth? ..................................... 24

Controlling claims & Cash plans ............................................................................................... 24

Competition............................................................................................................................. 25

RQ 4: What is the future of the NHS and what policies or techniques can be used to make private

healthcare more attractive and affordable? What systems are used successfully by other

countries? ................................................................................................................................... 27

The future of the NHS .............................................................................................................. 27

Taxation................................................................................................................................... 30

Foreign Systems ....................................................................................................................... 31

Key Findings ................................................................................................................................ 31

Discussion of Results ....................................................................................................................... 32

RQ 1: Has there been a change in the culture of the target market of private healthcare? What

factors caused the change? ......................................................................................................... 32

Poor NHS service ..................................................................................................................... 32

Cost of Private Healthcare ....................................................................................................... 32

Still seen as a luxury product.................................................................................................... 32

RQ 2: What is the potential for future private healthcare market growth? ................................... 33

Making the product affordable ................................................................................................ 33

Innovation ............................................................................................................................... 33

Working with not against the NHS ........................................................................................... 33

RQ3: What factors will impact upon private healthcare market growth?...................................... 34

Controlling claims .................................................................................................................... 34

Competition............................................................................................................................. 34

RQ 4: What is the future of the NHS and what policies or techniques can be used to make private


countries? ................................................................................................................................... 34

The future of the NHS .............................................................................................................. 34

Taxation................................................................................................................................... 35

Foreign systems ....................................................................................................................... 35

Conclusion, Recommendations, Limitations and Future Research .................................................... 36

Limitations................................................................................................................................... 36

Usefulness ................................................................................................................................... 36

Future Research .......................................................................................................................... 37

References ...................................................................................................................................... 38

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Introduction

Background to the Research Current figures realised by health England show that the government currently spends £95.6bn,

which is a figure that is likely to continue to grow. Couple this with the increasing dissatisfaction with

the service levels provided by the NHS and an ageing population means that the dependence and

spending on the NHS is only going to increase. The strain on the NHS will reach a point where things

will have to change, this research will try to identify whether the NHS is still good enough to

continue as a sole method of healthcare or whether the government needs to look at ways in

sharing the load with private healthcare. Despite the lowering service levels in the NHS it has not

had the knock on effect of growth in the private market, research carried out by LaingBuisson (2013)

shows market value growth has been extremely low with a contraction in the market in 2011. This

research will therefore look at the reasons for low market growth and try and identify if there is a

link between poor NHS service and higher private policies bought. It is clear that the private market

is not taking much of the strain and spending of the NHS, with the need for NHS reform this project

will look at potential ways in which the system can be changed for the better, to help lower the

strain on the NHS and provide better healthcare for the population. This project will look at

particular government regulation and look at healthcare policy around the world to get a better

understanding of the particular solutions the government could use.

Aim Statement The aim of this project is a qualitative investigation into whether there has been a change of

consumer perception towards private healthcare and what role private healthcare has to play in the

future, whilst drawing on the knowledge and experience of industry experts.

Research Questions 1. Has there been a change in the culture of the target market of private healthcare? What

factors have caused the change?

2. What is the potential for future private healthcare market growth?

3. What factors will impact upon private healthcare market growth?

4. What is the future of the NHS and what policies or techniques can be used to make private


countries?

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Literature Review

Introduction

Despite several research projects in to the demand factors for public and private healthcare and

research in to the different health systems in place around the world there has been little evidence

or research in to the future for healthcare in the UK and the potential changing consumer

perception. There is little academic evidence to a changing in the consumer’s view of the NHS or a

change in their attitude of the market, this research will look to fill this gap by identifying if there has

been a changing perception of consumers, whilst trying to propose recommendations for the future

of the UK healthcare system. The purpose of this literature review is to use the current literature to

justify the need for this research and use what academic research is available to build a better

knowledge around the subject.

The review will initially set the cast wide by discussing the theory behind consumer behaviour and

getting a better understanding of how consumer perception alters and its link to consumer

retention. From this the review will then narrow down to the demand factors for private healthcare,

where the review will discuss why people buy private healthcare and analyse whether these are

applicable and if certain reasons have become more prevalent. After discussing these factors the

research will lead to using academic literature to identify recent trends in the private healthcare

market, linking back to demand for private healthcare and changing perceptions. To round off there

will be a review of government policy for healthcare and gaining an understanding of health systems

around the world. As stated by King & Green (2010) that the UK, Netherlands and Australia have the

best health system performance, the review will therefore look at these two countries due to their

economic comparison and similarities with the UK.

Consumer Behaviour & Perception

The first place for this project to look is to research the literature and theory regarding consumer

behaviour. Blackwell et al (2001) define consumer behaviour as the activities people undertake

during obtaining, consuming and disposing of goods and services. However Blythe (2008) furthers

this definition and focuses on consumer behaviour as being the study of consumption activities and

why people buy. Blythe’s definition better suits the study of this project, as the aim is to understand

why people would move to private healthcare.

A key aspect of consumer behaviour is consumer perception; Blythe (2008) widely describes

perception as analyzing the environment around us to develop a picture of the world. Engel et al

(1986) furthers this description and states that perception is built by receiving stimuli which is

interpreted by the individual which creates a certain response. Brassington & Pettitt (2005) backs up

these definitions and suggests perception is the way in which consumers analyse, interpret and

make sense of information, they also go on to state that this is affected by personality, experience

and mood. This however is not necessarily relevant to healthcare as it’s more of a service; however

Wakefield and Blodgett (1999) give a more relevant definition by suggesting that the tangible

physical surroundings effect perception. Wakefield & Blodgett’s definition suggests there is a

different perception between private and public healthcare as the physical surroundings are quite

different between the two systems.

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Looking at perceptions in order to analyse factors that may be causing a change in the private health

market, it is important to look at the theory behind changing consumer attitudes. Blythe (2008)

describes the components of attitude as being cognition, affect and conation, and suggests that a

change in attitude is due to a change in one of these factors. This is backed up by Evans et al (2006)

who suggest that attitude is also made up by those factors, which stand for a consumer’s beliefs,

emotions and intentions. It could be said that consumer’s beliefs, emotions and intentions have

changed towards the NHS suggesting there is a change in consumer attitude, hence the need for

research in this area.

Consumer Retention

Moving on from consumer perception, Cooil et al (2007) looks at consumer retention, and suggests

that there is a relationship between consumer loyalty and consumer satisfaction. Rust (2002) backs

up this suggestion by stating that consumer satisfaction plays an important part on consumer

retention and loyalty. Naam et al (2011) also supports the idea that consumer retention and loyalty

is linked to consumer satisfaction. Naam et al also goes on to suggest factors that impact upon

consumer satisfaction; stating that physical quality, staff behaviour, ideal self-congruence, brand

identification and lifestyle congruence all impact upon brand loyalty.

However this literature focuses on brand loyalty in the private business sector, therefore it is

important for this project to look at how this differs in the public sector. Corbin et al (2001) suggests

that it is still important to build consumer satisfaction but also suggests it is important to build

customer confidence. Kim et al (2008) backs up this idea by suggesting that it is imperative to build a

high level of trust to achieve a successful healthcare organisation. Whelan et al (2009) furthers the

concepts of consumer retention in the public sector by suggesting it is important to look at the

customer facing employees and ensure they have a positive view of the business. Whelan et al

description is a little too narrow; the more relevant journal for this research is Corbin et al the

suggestion of confidence and satisfaction being linked to loyalty is the basis for this research, as

described the confidence in the NHS is falling which leads to the assumption, on theory set out by

Corbin et al, that there has been a change in consumer perception and attitude.

From the information gathered from this literature one key area of focus for this project will be to

look at consumer satisfaction in the NHS. Kim et al (2008) and Corbin et al (2001) provide the most

useful research by stating how important satisfaction and confidence is directly relating to

healthcare. These journals also suggest that there is need for this research as the presumption made

by the decision to undertake this research is a falling confidence in the NHS. Therefore on evidence

by these journals mean that there should have been a change in the market. Retention is also a vital

area to consider because if private healthcare is becoming more of a need than a want then the NHS

is clearly failing to retain their customers.

Demand Factors for Private and Public Healthcare

Leventhal et al (2002) outlines the common sense model (CSM) which describes that consumers

review their treatment to decide whether they should search for a better alternative. Bradbury et al

(2012) used this framework to analyse consumer intervention in both the public and private sector.

They found that the three main determinants were choice and control, vulnerability and trust. This

in effect shows that one key factor in the demand for the two different health systems is the service

received, with consumers more likely to use the system with better service levels. As discussed when

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looking at consumer perception, service levels and their link to retention is therefore clearly

apparent in the healthcare market, judging by the research carried out by Bradbury et al (2012). This

is backed up by the findings of Owusu-Frimpong et al (2010) who found that patients will shop

around for the best satisfaction levels. Bradbury et al provide a good outline for the general

determinants of health demand, however Owusu-Frimpong et al discusses in more depth and

narrows down to service levels playing a huge role in determining demand. Service levels are clearly

an important factor in private healthcare demand.

Regarding service levels Proper et al (2001) suggests that people are drawn towards private

healthcare rather than pushed away from public healthcare. However Besley et al (1999) goes

against this statement by suggesting people are pushed away from public care due to poor service.

Bishop et al (2011) also suggests that although financial resources are a key factor, physiological and

sociological factors are also important. As mentioned by the research carried out by Bradbury et al

(2012) choice and control is a key determinant in which system to use, that idea is backed up by

Cutler & Zeckhauser (2000). The research carried out by Besley et al better supports the research as

it suggests that where consumers are unsatisfied with the NHS they will move to private and

therefore will be pushed towards private care. However as well as service, the findings of Bishop et

al shows that it is not just down to service, hence the reason for discussing the government’s role to

play. The literature leaves room to fully explore how important satisfaction levels are in determining

the demand for private healthcare.

As Bishop et al suggests financial resources are important in deciding the use of private healthcare;

this is backed up by Propper et al (1993). This idea is furthered by King & Mossialos (2002) who

suggest that although individuals may be drawn to private healthcare once their premiums reach a

certain level they will discontinue their cover due to the sheer cost. As well as premium levels

Propper & Burchardt (1999) suggest that household income levels and disposable income affect

demand for private healthcare, they further their study by stating that 55% of private patients are

within the top 55% income distribution. This is backed up by Propper et al (2001) who also suggest

that the demand for private healthcare is linked to income. The ideas presented by these journals

suggest that premium levels can influence the demand; however King & Mossialos and Propper &

Burchardt only discuss financial resources of individuals. Propper et al (1993) provide a more useful

statement by suggesting financial resource is vital, this could be used in context of both resources of

individuals and companies. Drawing from the literature the state of the economy looks to be an

influencing factor in the demand due to its direct links to financial resources of individuals and

companies.

Drawing from the literature it is fair to say that the key determinants are satisfaction and financial

resource; however the more important factor may be financial resource as without this people are

stuck with the NHS. There is therefore a need to research on what role private healthcare system

has to play in the future, the literature shows that if satisfaction levels remain low and the cost of

private remains to be too high there will become a problem. This research therefore looks at the

possible solutions to this problem, which is a previously uncovered issue.

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Changes in the Private Insurance Market

Oxtoby (2012) shows that the satisfaction levels of the NHS have fallen in recent years, after

identifying that one of the key determinants of demand for private healthcare is service and

satisfaction levels, this research will analyse the private healthcare market and whether the change

in satisfaction levels have actually pushed people towards private healthcare. Propper et al (2001)

states that since the 1990s growth had slowed to around 5%. However this isn’t a recent research,

Blackburn (2013) shows a more up to date and detailed view of the private health insurance market,

and shows that in real growth terms since 2008 the market shrunk by 7.2%.

As we can see from the research carried out by Blackburn (2013) the UK private healthcare market

hasn’t grown in a number of years. However from the previous literature and report by Oxtoby

(2012) we have seen that satisfaction with the NHS has fallen in recent years which should cause a

push towards private healthcare. Bang (2010) suggests that the cost of healthcare in the UK is

rapidly increasing; this has a knock on effect on the private health market. This is backed up by

Powell & Laufer (2010) who suggest that the price of healthcare is much higher than inflation, and as

Bang (2010) suggests the US and the UK have the same problem. The rising cost of healthcare means

that the premiums paid by the consumer will increase; this is shown by Blackburn (2013) who shows

the increasing premiums. Blackburn also goes on to show that there have been a number of

companies and individuals cancelling their medical insurance policies in recent years, and suggests

that this could be due to the economic downturn. This literature is important, it backs up the

problem of private healthcare becoming more of a need yet being unaffordable, the research of

Blackburn and Bang suggests that this is down to rapidly increasing health insurance and health

products costs.

This presents a problem for the UK government as suggested by Bang (2010) healthcare costs are

growing at an unsustainable pace, and dissatisfaction with the service is increasing. As shown by

Blackburn the private provision of healthcare is unable to take some of the pressure of off the NHS.

Therefore the UK could be seen to be at a cross roads, with consumers becoming more unsatisfied,

growing private insurance premiums and the increasing spend on the NHS. Propper (2001) suggests

that there needs to be a rethink in how the UK provides healthcare and suggests that the balance

between public and private spending needs to be reviewed. Propper also states that the spending on

healthcare in the UK is one of the highest across the G7 countries. Propper (2001) consequently

shows the need for this research, if as this project suggests there is a change in consumer perception

then the system needs to change. Propper is the most relevant journal in this respect due to the

number of research papers created on the same subject.

Government Policies on Healthcare Provision

As described by Timmins (1995) the main aim of the NHS set out in 1944 was to provide everyone

with the best healthcare available. As previously discussed the literature has shown that the cost of

healthcare is rising uncontrollably and the level of service is dropping and therefore consumers are

not getting “the best healthcare available”, therefore establishing the need for government

intervention. Savas (2000) suggests that government intervention happens to allocate public goods

which if left to the market would be allocated inefficiently. Emmerson et al (2000) outlines that if the

government were to adopt a purely private market, society would not approve on moral grounds.

Emmerson et al goes on to state that current government intervention in the market provides an

optimal point where healthcare is provided free at point of delivery. Both Propper (2001) and

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Emmersont et al (2000) state that government intervention in the healthcare market is justifiable on

efficiency and equity levels. It can be drawn from this review that for the market to be efficient there

has to be government intervention; Emmerson et al provides the most useful research by suggesting

society would not approve of a private market. The NHS is a massive political subject and society is

incredibly attached to the idea of the NHS therefore it could be suggested that government

intervention is an important issue to be discussed.

Bozeman (2002) suggests that governments intervene in markets where market failure exists, where

there is a poor allocation of resources. Bozeman also goes on to suggest that governments are

constantly analysing whether the public is best served by current arrangements and look at whether

goods and services would be better allocated privately. It could be said that the government will be

looking at how to better allocate healthcare resources, however as already stated by Savas (2000) if

healthcare was left to the market it would be inefficient. The government could therefore look at the

creation of hybrid organisations as discussed by Emmer & Crow (1999), who describe a hybrid

organisation as part public and part private owned. From the literature it can be said that the

current market for public healthcare is inefficient and shows there is allocative inefficiency,

therefore the government has to intervene, one suggestion is to look at a hybrid organisation and

look at ways in which the private and public side can better interact. As shown by Rhea (2008)

healthcare provision varies across different countries with some spending less and achieving better

results, it is therefore important for this report to analyse the literature on the provision of

healthcare in other countries.

Healthcare Provision in Competing Countries

As discussed in this review the increasing problems with cost of the UK health system means it isn’t

working efficiently, the solution could be found in comparing other health systems around the

world, hence the review of literature of health systems in Australia and the Netherlands.

Okma et al (2011) outlines how the healthcare system works in the Netherlands, and states that

after a healthcare reform in 2006 all individuals are required to pay for private healthcare whilst

paying tax on earnings to go towards government run schemes. Okma et al goes on to state the

reason for this is to try and create more competition between private insurance so that they try to

control costs better to avoid losing customers. Hurst (1991) also states that the majority of hospitals

in the Netherlands are privately owned and they are not financed by the government, the

governmentally fund will pay for exactly what healthcare is needed and therefore the allocation of

resources is more efficient. Hurst goes to state that the price of both private healthcare and

insurance are heavily regulated by the government to keep it at a low level. From this literature it

can be said that regulation of the market in the UK could lead to a cheap private insurance market.

As stated by Rhea (2008) Australia are much like the Netherlands and Germany in that they adopt a

multi payer approach to funding healthcare. This is better explained by Doorslaer et al (2008) who

states that Australia use a mix of public and private healthcare service. Doorslaer et al also go on to

explain that the public provision of healthcare is provided through a fund, much like the Netherlands

and Germany, called Medicare which is funded by both taxes and employer contribution (Andrews

2011). As furthered by Doorslaer et al alongside Medicare Australia has a large private insurance

market which is highly encouraged by the government through tax incentives and subsidies,

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Doorslaer et al also describes that the cost of treatment is recoverable. Drawing further from

research by Doorslaer et al as cost of treatment is recoverable public money is only spent on exactly

what is required, meaning there is no allocative inefficiency.

To draw conclusions from the literature the key themes to ways in which other countries control

healthcare systems is by high regulation, regulation will help control the cost which the UK could do

to make it affordable.

Conclusion

Brailsford & Vissers (2011) suggests the problem in the UK, by stating that the rising cost of

healthcare due to new technologies and an ageing population are causing poor service, they also go

on to suggest that the population are becoming more unwilling to accept bad service. This review

has therefore established the problem, as stated above by Brailsford & Vissers (2011); the literature

has justified the need for research by describing the demand factors for private healthcare mainly as

being poor NHS service and finances. The presumption of this research is that the service of the NHS

has changed hence the need for this research to back up whether this is the case. The literature has

also concluded that the private market hasn’t grown, which means that the determinants of demand

may not be accurate, this project therefore fills the need of analysing the market and better

understanding why the story the literature is telling is not translating into the real life market. The

reviews comparison of government policy and other healthcare systems has also left an area for

discussion into whether these systems can be applied to the UK. With the NHS being such a high

political tool and a hugely valued part of society the need for discussion and research in this area is

high.

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Methodology

Introduction

The research strategy of this project will draw from the information gained in the literature review

and use the initial objectives and research questions drawn out to act as a framework for this

research. To help plan the research method it is important for this project to consider the reasoning

behind using certain methods and how that will impact upon the validity of data collected. The main

aim of the methodology is to identify the most appropriate ways for this research to collect the

relevant data. The research will look to collect data using qualitative methods. The research will look

to gain data on the changing environment in the NHS and the private healthcare market.

Research questions

1. Has there been a change in the culture of the target market of private healthcare? What

factors have caused the change?


3. What factors will impact upon private healthcare market growth?

4. What is the future of the NHS and what policies or techniques can be used to make private


countries?

Research Strategy

As discussed by Saunder et al (2003) the research strategy is the identification of a plan that will help

answer the research questions. It is needed in this project to plan the methods for research and

justify their validity and effectiveness. The aim for this project is to carry out qualitative research on

the changing consumer perception and the overall change in the private healthcare market. As

discussed by Dey (1993) qualitative research allows for the extraction of “thick” and “thorough” data

and therefore allows for the topic to be described in more depth. Robson (2002) follows up this

statement by suggesting that qualitative research gives the project the opportunity to explore a

subject in a real manner. Carrying on from Robson’s idea of the opportunity to explore the subject,

the main study of research of this topic will be through exploratory studies. Saunders et al (2003)

describes the advantage of exploratory studies as being the ability to clarify an understanding of a

specific problem, as the research looks to understand and analyse the problems with the NHS and

the need for market change, the most appropriate methods appear to be through exploratory and

qualitative research.

Robson (2002) however points out that it is unlikely to adopt just one strategy as there may be more

than one purpose. This applies to this project as although the aim is to analyse a number of opinions

on a particular topic it is also to identify trends in the market, therefore part of the research will be

explanatory studies. Saunders et al (2003) identifies the benefit of this study as being able to identify

trends and relationships. This will be used in the research when identifying the link between poor

NHS satisfaction and private healthcare demand, as although part of this will be discovered through

exploratory research it will need to be validated through explanatory studies.

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Source of Data

The main source of data collection for this research will be through interviews with industry experts,

the interviews will be conducted to find out how they have seen a change in the perception of

private healthcare alongside what changes they have seen in the market. The plan for the research is

to interview three employees from Jelf Group PLC and in particular employees from their healthcare

division. To ensure that the data obtained is valid and useful, the project will interview experts in

this company. The interviewees will be healthcare managers, due to their experience and knowledge

and being able to see the opinions of all three will mean that the data is reliable and relevant.

However, the research will also use secondary research. Due to the primary data being collected

from healthcare managers who are likely to be in favour of private healthcare as it is their living

secondary data will be used to back up the findings and avoid any bias that may be inevitable from

this type of research. Despite the potential bias the interviews are still relevant due to them having

the best experience and knowledge to advise on the future of the market and how they believe the

private sector can work better with the public sector.

The research will draw from a number of secondary sources; one being the Department of Health.

The Department of Health post a number of NHS satisfaction survey results amongst other market

data which will be useful in validating the data collected. Alongside this the research will draw on the

findings of the market research done for LaingBuission by Blackburn (2013) into the private

healthcare market, as again this will help validate the opinions expressed in the interviews.

Why this Design

As discussed the research will take an exploratory and qualitative approach, and the main form of

primary research will be conducted through interviews. Saunders et al (2003) suggests that the steps

to taking exploratory research start with a review of literature and then talking to experts in the

subject followed by focus groups, Saunders et al furthers this by suggesting the benefit of an

interview as allowing the researcher to gain valid and reliable data that is applicable to the research

questions and objectives. Horn (2012) follows this up by describing interviews as being exploratory

and concerned with meanings, perceptions and understandings. Therefore carrying out interviews

for this research is justifiable and relevant due to the usefulness of interviews in exploratory

research, and due to the open hypothesis it is beneficial in discussing an open topic.

The interviews will be carried out on a semi-structured basis, Saunders et al (2003) describes a semi

structured interview as being carried out by the researcher who has a list of themes and questions,

as opposed to an unstructured interview which is described by Saunder et al as an interview that

discusses a general area and is informal. As the research has already identified themes for research

the interviews will be carried out on a semi-structured basis to ensure data is more relevant with the

ability to still discuss the issues in depth.

As discussed by Ghauri & Gronhaug (2005) the main advantage of using secondary data is the saving

in time and resources. This is the main reason for the use of secondary data in this research, due to

the previously mentioned time constraint secondary data will help collect data that would otherwise

be unable to be analysed under the time limit. Saunders et al (2007) suggests that secondary data

can be used to compare primary data with secondary data to validate it and identify trends. This

research will therefore use secondary research to back up primary data and check its validity.

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Meeting Research Objectives

The first objective of this research is to identify whether there has been a change in the perception

of potential users of private healthcare and the factors causing that change. To measure this, the

research will interview market experts to get their opinion on whether there is a changing

perception and get their view on what factors have caused this. Drawing from the literature a

change in consumer perception would mean there would be a change in the size of the private

healthcare market and the satisfaction levels, therefore to follow up the information found from

interviews the research will draw from secondary sources on the changes in market size and

satisfaction.

As identified from the literature the private healthcare market has seen little growth in recent years,

therefore the second objective of the research is to find out the potential for market growth in the

future and the factors or causes that will impact upon how achievable growth is. As this is purely

down to opinion the data for this will be collected solely from the interviews and will be analysed

and verified by the opinions across all the interviews. The final aim of the research is to analyse

government strategy on promoting healthcare and healthcare change, this is again down to opinion

and the main data will come from interviews and understanding of their expert opinion as to the

best way to go, again the number of interviews should help validate the data. Alongside this

however the project will use secondary data to identify certain policies and how successful they have

been in the past or how successful they have been in other countries.

Analysing the Data

To analyse the data collected from the interviews they will be transcript in to separate documents as

recommended by Saunders et al (2007). From this the research will then look to analyse the data

using categories and codes and grouping the data to relate to the research questions, as discussed

by Saunders et al (2007) analysing the data this way allows the research to identify themes that

relate to the prearranged framework and theory. This method of analysis will best suit this research

as the themes and framework for the research will be predetermined therefore there will be specific

themes and topics to look for.

Constraints and Problems

One of the main constraints faced by this project is the time limit. As previously discussed and set

out by Saunders et al (2003) the ideal steps in exploratory research are literature review, interviews

with experts and focus groups. Ideally this research would look to carry out focus groups alongside

the in depth expert interviews, however due to the time constraint this would not be feasible.

Therefore the research may not go in to as much depth as is desired when completing exploratory

research. However on the topic of focus groups, there is another issue and constraint to this

research. If the project were to carry out with focus groups it would be with patients on their

experience of the NHS. However, as suggested by Saunders et al it can be problematic in getting

access to participants when the nature of the topic is sensitive. Therefore it would be a hard task to

collect any form of primary data on this area, which suggests the reasoning behind using secondary

data for this part of the research. Also having the time limit has restrained the research to collecting

just 3 expert interviews, given more time the project would look to obtain a few more interviews to

validate the data even more. The other constraint with only carrying out interviews is that although

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they will have a very good grasp of people’s perceptions it will not be as useful as finding out

people’s actual perception.

Research ethics

Wells (1994) defines ethics as the code of behaviour that academics should adopt when conducting

their research. Saunders et al (2003) also describes ethics as the appropriateness of the research in

relation to the rights and affect on individuals involved in the research. Therefore it is important for

this research to consider the impact upon involving certain individuals and ensuring they are fully

aware of the research topic. The main concern with this research regarding ethics is the sensitive

nature of the topic, as some of the data that needs to be collected will be the satisfaction levels of

the NHS. As discussed by Saunders et al (2003) it is important that the research doesn’t invade on a

participant’s privacy. As some of the data required will involve finding out about peoples medical

experiences which is extremely sensitive, this project will not carry out primary research to collect

this data. Instead the project will draw on secondary data collected by the Department of Health

showing patients satisfaction levels in the NHS. The sensitivity is less relevant for the interviews as

they will not be discussing personal medical experiences and will be focusing more on their views on

the market.

Saunders et al (2003) describes that it is important for participants to be informed about the project

being undertaken, and that participants should be informed about their participation rights and the

use of the data. To ensure this happens, this research will carry out an invitation to participate to the

interviewees through email. In these emails, the potential participant will be informed of the project

topic and the areas of data needed to be collected, alongside being informed of the rights and how

the project will use their data. To ensure that the research is undertaken with integrity and quality,

the questions to be asked in the interview will go through a quality pilot, in order to get feedback on

what respondents feel should be changed and to see if the questions fit with the data that needs to

be collected.

15

Results & Findings To come up with the findings for this part of the report, the research used thematic coding derived

from the themes developed and the research questions set. The initial process started with

identifying the data that relates to each question by highlighting different sections as shown below:

“The insurers have to keep innovating their products, they have to keep finding new ways of

delivery care and producing products that meet customer demand, and there lies the

problem. If you ask most customers and say do you want private medical insurance, they’ll

say yes, what do they want? They want to go in to a clean hospital and go in when I want to

go in there, so it’s all about in patient care and that’s the expensive bit, so I think the future

of private medical insurance is actually umm that the industry has to broaden how it’s

perceived and defined so private healthcare plans which could be all the way from a dental

plan all the way through to a PMI plan, but there’s a lot more choice in-between. They are

starting to do that, I think what they’re not very good at, well not that there not that

good at it but the difficulty is that, the obvious opportunity is plans that dovetail with the

NHS, but in doing that they also have got to say they’ve also got to come out and market by

saying that the NHS isn’t very good at something, which they can’t do.”

Once highlighted and grouped under the research question the data was then analysed to find

common themes under the research question, as shown above showing certain themes such as

innovation. These themes were then all grouped together under these specific themes as shown in

the table below, once this process was done the most relevant findings were chosen and presented.

Making it Affordable Innovation Working with not against the NHS


so that had to try and find a way around both keeping the policy and still benefiting from the value of it but having it a price that was justifiable and affordable – Interviewee 3

Yeh I think , I welcome the anything that makes any form of health and wellbeing protection affordable I would welcome and I think that companies have looked at it and they have been able to say we don’t have to be elitist in the way we treat our employees anymore so it’s not top hat – Interviewee 2

The insurers have to keep innovating their products, they have to keep finding new ways of delivery care and producing products that meets customer demand, and there lies the problem. – Interviewee 3

How many youngster are we putting in that, none and that’s the problem you have to have the younger ones, who don’t claim, to pay for the older generation that do claim. If that stops, which it has to an extent then it’s going to get worse, on our book of individuals the loss ratio is 98%. – Interviewee 1

Umm I think there’s an opportunity for the NHS, and for private healthcare providers to engage with the government, and engage with the NHS to engage in a conversation about the future of the NHS and find ways that they can offer very affordable products that may allow individuals to insurer umm insurer themselves against the cost of treatment that the NHS may not decide to focus on in the future – Interviewee 3

So if you can get rid of the competitiveness between the two and work together will be better. Because the end game is get person X fixed and that should be the goal not this competitiveness. – Interviewee 2

Innovation

ion

Demand factors

Innovation

ion

Future growth

ion

16

The following chapter will present the findings of the analysed data coupled with secondary data

found to support those findings. After the findings the research will present the significance,

importance and meaning of these findings in the discussion chapter following this.

RQ1: Has there been a change in the culture of the target market of private

healthcare? What factors have caused the change?

Declining NHS service

One trend identified from the data collected is that the industry experts believed that the perception

and benefits of private healthcare have been enhanced by the falling quality of the NHS, the

interviewees responses are displayed below:

Interviewee 1 Interviewee 2 Interviewee 3

“If there is a change, there is more people who pay for it themselves, who aren’t insured, the waiting lists are so long that they’ve been told to wait for so and so to see a consult about x, and they have to wait 6 months. So do you wanna wait 6 months and find out you need an operation which is another 6 months? A lot of people actually go and pay for the initial consultation privately”

“You either get private and don’t have a waiting list, or you go public and have a waiting list.”

“consumer perception of the market will have changed in line with changes in the NHS, and I think that it’s a bit of a dichotomy really because we’ve had a demise in the NHS, greater umm greater experience of cross infections so there’s been more and more incidences of umm people going in to the NHS and picking up some sort of infection.”

“Yes I want to get quick treatment when the NHS can’t do it for me, yes I want to be able to go in to a private hospital for treatment where I know it will be clean and I know I’ll have a choice of dates to be seen”

“They want to go in to a clean hospital and go in when I want to go in there, so it’s all about in patient care and that’s the expensive bit”

From the table we can see that all interviewees believed that there has been and are downfalls with

the NHS and suggests the reasons for going privately. Interviewee 1 also argues that more people

are now paying for private treatment themselves; the interviewees also showed that one of the

main problems with the NHS is the waiting lists and times.

The following is a graph produce by Ipos Mori (2012) on the satisfaction levels of the NHS, showing

that as discussed by the interviewees that satisfaction levels in the NHS are falling:

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(Ipos Mori, 2012)

The graph bellow also shows that one problem the public have identified, which was also discussed

by our industry experts is that waiting lists are becoming more of a problem:

(Ipos Mori, 2012)

The secondary research therefore backs up the findings by the industry experts. From the data

collected the report has also found what the key demand factors of private healthcare are and what

consumers perceive to be the benefits. Interviewee 1 suggests:

“You look at why people buy medical insurance its things like choice, convenience as

opposed to waiting lists”

This is backed up by interviewee 3 who argued that the perception hasn’t changed by stating:

So the perception of PMI hasn’t changed in that customers still want it for the right reason,

speed, choice, quality of care, that hasn’t changed but what they don’t want is that they

don’t want to pay the price that it’s traditionally come at”

Therefore the research has found that the key perceived benefits of private healthcare are choice,

convenience and quality of care, and these have become enhanced because of the increasing

waiting lists and the falling satisfaction with the NHS. However interviewee 2 suggests that although

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there may have been a change in perception favouring private healthcare, the purchase of the

product has gone down due to the cost.

Cost of private healthcare and the effect of the recession

As previously discussed by interviewee 2 the purchase of private healthcare has not increased with

the demise of the NHS. This is shown in the graph below:

(Laing & Buisson, 2013)

The interviewee’s discussion around the topic of the cost of private healthcare is displayed in the

table below:


“Costs have reached a point where the individual market is starting to drop because they can’t afford it.”

“Things are so expensive; a one night stay in the BUPA hospital is probably more than staying in the Savoy, 5, 6 hundred a night without doing anything. A week stay, £4,000 then the drugs and dressing, then the theatre then the consultations it all adds up. Because your insured every time they give you an aspirin it costs they add it to your bill sheet like a waiter, but when your there in pain and they offer you a pain killer you’ll take it”

“Compound interest doubles every 5 years you know how the hell can you carry on with that.”

“Because a knee replacement is sort of 9 grand that’s the standard cost, of which the consultant gets 2 thousand 300 you know so it’s a big chunk”

“It is something that they would really like but the reality is because of the delivery of the private health service and the cost structure its unaffordable.”

19

Therefore the research has established that one reason for a lack of growth in the market is the cost

of the product, which can be put down to medical inflation and the cost structure of the product.

The interviewees also highlighted that vast increase in premium levels down to technological

advancements and new drugs.

The graph below shows the rise in the average cost of medical cover:


Interviewee 3 develops another reason for why the product has become unaffordable by discussing

the impact of the recession on the market:

“I think the main change we have seen in the last ten to fifteen years is as a result of sort of

a financial err credit crunch so PMI being a discretionary spend not a compulsorily spend its

impacted in two ways”

“so inevitably with the PMI being a discretionary spend and not a cheap one umm it was

something that in the retail market it was something that was impact quite quickly and quite

heavily by the credit crunch, and we saw, probably saw, the market contract, some reports

estimate by up to 25 percent, in the retail market”

The graph below supports this theory. Showing that, despite irregular activity between 1998 and

2002, the growth in GDP is strongly linked the growth in company paid PMI policies.


20

Drawing from the interviewees and secondary research it can be said that the findings of this area of

the research are that the low or nonexistent growth in the market is down to the costs of the

product, which is caused by medical inflation and the lowering disposable income of companies and

individuals as a result of the credit crunch.

Still seen as a luxury product

Another pattern gathered from the data is that due to the cost of the product the perception of

private healthcare is still that of a luxury product, where interviewee 1 describes:

“Take people’s attitude, if you go back 25 years, 83’ there were only 2 providers and it was

deemed to be an elite offering. Those who could afford it would buy it and those who could

pay for it for their directors would pay for it as well”

The graph below supports the theory of it being a luxury product, by showing its link to household

income:


Interviewee 1 therefore suggesting that it was previously just an elite offering, this is backed up to

an extent by interviewee 3, however interviewee 3 discusses that it doesn’t mean there hasn’t been

a change in perception, and argues:

“The perception of it was probably that it is a product that I would still like to have but for

the retail market it remains a luxury purchase in how it’s perceived and is primarily

restricted to individuals who would be described as affluent and between affluent and high

net worth definitely, and typically not employed, so retired self employed umm is the typical

answer there. Within that there were lots of self employed people as in small business

people who saw PMI as essential in that if I get sick, I’m my business so if I’m ill and not

being treated then I’m not going to work and not going to make any money”

“So the perception is that yes I want all the value that a PMI policy will give me but I don’t

want to pay what I paid before and consumers will accept that will involve a compromise in

the level of cover”

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Therefore the findings of this research are that although perceptions towards wanting private

healthcare and consumers views on the NHS have changed the product is still viewed as a luxury

product due to the shear cost.

Companies still value the product

Despite the credit crunch and the high cost of the product the industry experts suggested that

companies still greatly value the product, as discussed by interviewee 3:

“Companies looked at the benefit of healthcare and said yes we still perceive the same

values in the product as in its goo value for recruitment and retention”

Interviewee 3 goes on to discuss the effects of companies scaling down as a result of the recession

and describes their perceptions:

“Umm but they were down scaling down to actually their core staff so the value of PMI

actually if anything increased and became more imbedded, because they perceived, that

actually now I have cut to the bone if I lose the core people through illness then I need to

know they’re there so we saw very few people companies, if any abandon medical

insurance. So the perceived value if anything was enhanced because of the credit crunch”

Interviewee 1 also describes what companies perceive to be the benefit of private medical insurance

as suggests that this has changed:

“People's attitudes has changed towards it in terms of a company benefit, in terms as its

gone from a directors perk to a part of wage negotiation at different levels to now it

retracted and people are given it out less and less as a perk, we are seeing less and less

expansion of policies. Years and years ago you put an extra person on it grows, we used to

have loads of additions to policies daily, it doesn’t happen anymore, don’t get me wrong you

do still get them but there not as regular”

Interviewee 3 furthers the changing in why companies buy the product and their perceived benefits

of the product:

“20 years ago has shifted from the reasons that they originally bought it from it perhaps

being a perk, and actually what the recession has done has bought their perception back to

being a business benefit that has employee benefits to “

The research has therefore identified that companies perceived benefits of the product have

changed to being used more of an employee benefit, and that although businesses are sticking with

the product the expansion of those policies is no longer happening and therefore the industry is

struggling to grow.

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RQ 2: What is the potential for future private healthcare market growth?

From the data displayed above it can be said that the view of the industry experts is, generally that

private healthcare has become more attractive however, and interviewee 2 does not believe this has

affected the PMI market and discussed:

“The dichotomy is whilst you’ve got that plus you’ve got ambulance waiting outside umm

A&E units, no beds, all the problems at the NHS the consumer purchase of PMI has actually

gone down”

The data then went on to analyse ways in which to grow the market, and found the following

patterns.

Making the product affordable

Below is a table showing the respondent’s views and belief that to grow the market the product will

need to become more affordable.


“It's got to be price affordable and private medical insurance at the end of the day is an insurance policy like your car insurance, you claim is paid. But to attract a young audience they have to be price competitive and they have to be seen to be getting value for their money.”

“The underlying theme is that they are trying to ensure that the provision of healthcare competitive so that people can afford to pay for it. They are trying to keep it at a level where you and I can afford to pay for it.”

“Yeh I think, I welcome the anything that makes any form of health and wellbeing protection affordable I would welcome and I think that companies have looked at it and they have been able to say we don’t have to be elitist in the way we treat our employees anymore so it’s not top hat”

“And find ways that they can offer very affordable products that may allow individuals to insurer umm insurer themselves against the cost of treatment that the NHS”

As we can see the research has found that to grow the market the product must become more

affordable so that it is attractive to a wider audience. Interviewee 2 also touched on the idea of

creating different products which was the next trend identified in the research.

Innovation

From the interviews the strongest pattern that emerged in how to grow the market in the future

was that the market has to innovate. The discussion by the interviewees is displayed in the following

table:

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“The challenges the market have is that there used to be innovation in what was offered”

“How many youngster are we putting in that, none and that’s the problem you have to have the younger ones, who don’t claim, to pay for the older generation that do claim. If that stops, which it has to an extent then it’s going to get worse, on our book of individuals the loss ratio is 98%.”

“That’s what cash plans are brilliant for. Those sort of things will become more attractive to people, you get optical, dental, consultations etc all sorted. If you’re pregnant, blind or if you fall over you can get your money back from that kind of product”

“the world of cash plans is very exciting because you’ve got optical dental physical therapy consultations and scans which means you’ve got diagnostics umm which as paid as a cash sum”

“The insurers have to keep innovating their products, they have to keep finding new ways of delivery care and producing products that meet customer demand, and there lies the problem.”

“So I think to see how volume will grow in the market will take significant product innovation, will take government support of government flexibility on taxation umm and will also the key one is the ability for companies like us and product suppliers to offer employers very effective ways of measuring return on investment in this kind of stuff”

“the future of private medical insurance is actually umm that the industry has to broaden how it’s perceived and defined so private healthcare plans which could be all the way from a dental plan all the way through to a PMI plan, but there’s a lot more choice in-between”

The findings are therefore that the market needs to see more innovation and innovative products

that are attractive to a wider and younger generation, as well as being perceived as offering more

than top end private health insurance. The interviewees also discussed the attractiveness of cash

plans in attracting a younger audience.

Interviewee 1&2 discuss ways in which the market is already innovating, as already discussed things

such as cash plans are appealing to a wider audience, but interviewee 1&2 discuss the effect of open

referral products and there potential effect on the reduction in cost of the product:

“They are using more open referrals as a way to cut costs which basically means they are

guiding you to use certain suppliers, i.e. hospitals or certain surgeons that provide a

competitive rate. In other words they are trying to put you somewhere with the cheapest

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rate; hopefully that’s not the case. They are trying to control costs and give you quality

treatment.” – Interviewee 1

“as open referral kicks in and brings the cost down as there’s more competition as we get

transparency, and the thing about transparency it’s not just what doctors charge privately it

is transparency about outcome” – Interviewee 2

Therefore the research has found that the industry is already innovating to try and control costs.

Working with not against the NHS

Another pattern identified was the need for both private and public systems to work together and

remove all competitiveness. Interviewee 3 discusses the need for a conversation which could lead to

the private market producing products that supplement the NHS:

“Umm I think there’s an opportunity for the NHS, and for private healthcare providers to

engage with the government, and engage with the NHS to engage in a conversation about

the future of the NHS and find ways that they can offer very affordable products that may

allow individuals to insurer umm insurer themselves against the cost of treatment that the

NHS may not decide to focus on in the future”

Interviewee 1 also discusses the need for the systems to work together:

“So if you can get rid of the competitiveness between the two and work together will be

better. Because the end game is get person X fixed and that should be the goal not this

competitiveness.”

Therefore this research has found that for future growth in the market and to produce a better

healthcare system for the population private and public systems need to work together more.

RQ 3: What factors will impact upon private healthcare market growth?

Controlling claims & Cash plans

As previously found the cost of the product is unaffordable, interviewee 1 discusses one reason

behind why the cost is so great.

“It’s a simple equation if you’ve got a premium coming into a fund and you’re paying out

more than the fund you have to refill the fund. Simple economics. So what happens are the

actuaries say we need £100 to cover so many people and we pay out £150 that’s

underwriting loss, and next year we have to charge these people £170 so there chasing it

and that what’s happened.”

This leads on to another pattern found through the data collection, and that being the need for

insurers to control the cost of the claims. Interviewee 1 discusses the need to get more profitable

business:

“So how do you get more people in to that book that isn’t going claim, however the problem

is insurers are looking at that ratio and charging a high price because they are so close to

making a loss. The problem with that though is it’s never going to go down because you’re

25

not attracting the people who are going to make that book of business more profitable. It

will end up collapsing.”

As already touched on interviewee 2 suggests that controlling costs could be down to the use of

open referral and ways in which claims can be controlled:

“open referral which means if you go to your GP as you would do before but the GP can only

referral on condition or treatment not to a person or to a hospital you’d have to go to your

insurer who will say okay you need an operation on your disc this is there is four consultants,

we recommend four of these if you chose one of these you bills will be paid in full, and umm

this hospital not the spire perhaps it might be the Nuffield is where you’ll go for your

treatment. That way they can control their costs, because they have an agreement an

agreed tariff with the consultant and with the hospital chains”

The industry experts therefore suggest that one of the biggest factors that will impact upon the

future growth of the industry is how well insurers can control costs.

Competition

To help control claims cost, one result that emerged from the data is the need for an increase in

competition amongst the private hospitals, and the investigation by the competition commission

into the market. Below shows the commission’s points on how they have set out to increase

competition in the industry:

(Competition

Commission, 2014)

Interviewee 2 discussed the impact of the competition commission investigation in to the market:

“3 years ago they decided to have another look at it so the office o fair trading had received

a number of complaints, umm from consumers as opposed to UK corporate about the rising

cost of PMI, which year on year umm if you compound it is a minimum of ten percent

perhaps between 10 and 20 percent year on year so it really has been going up. This time

there was sufficient evidence to report the industry, not the insurance industry I hasten to

add not private medical insurers but the private healthcare industry made up of if you like,

the hospital providers the consultants who practice private and the insurers. That’s the

whole industry. The believed it was not competitive, it was no transparent, and it was umm

manipulated so that it was not in the interest of the consumer.”

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Interviewee 1 also suggested the investigation as a way to increase competition and reduce costs:

“In certain areas they have told some hospitals groups they need to sell some of their

hospitals to other groups to allow more competition. Because they have a cartel they can

control cost. So what the competition commission is trying to bring in more competition to

lower prices”

The idea of selling hospitals was also discussed by interviewee 2 who suggested that the lack of

competition leads to manipulating costs and leaving the consumer worse of:

“In London umm one hospital chain HCA has to sell and they are making them sell, they’ve

got 7 hospitals they’re making them sell 2 hospitals. To a competitor because there was not

competition in the area, now it will go on for donkeys years in the courts you know because

they’ll fight it but they had been artificially manipulating the cost because there was no

competition. There’s nowhere else you could go in London. They also looked at the rest of

the country and said that where there was insufficient competition hospital chains had to

consider selling”

Both interviewee 1&2 agreed that the investigation by the competition commission would ultimately

lead to more competition which is beneficial to the consumer and will help lower the cost. However

interviewee 3 disagreed that the investigation would ultimately lower the price charged by private

hospitals. Interviewee 3 however did agree that there are some benefits such as transparency but

believed that the solution to the problem will be ineffective:

“Well I think there are two reasons; there remedy I don’t think will make any difference. The

remedy has improved the quality of the customer experience so, if a consultant has to tell

you up front what they are going to charge you then brilliant that feels like fair trading to

me, it’s ridiculous that is isn’t like that already. Private hospital has to publish the quality of

the healthcare they provide, like the NHS which is absolutely right, it’s only fair to. Umm do I

think that being forced to sell hospitals will charge to cost of provision? No, why do I say

that? Ahh I think that the hospital chain in London HCA, who have been told they have to

sell 2 hospitals will fight them all the way through the courts , because they have picked on

their premier hospital to sell, which is London Bridge, and umm you won’t sell it would you.”

Interviewee 3 further discussed this by suggesting that competition would not fundamentally lower

the cost of care in London:

“I doubt it because anybody who buys care in those hospitals, they’re going to have to take

out debt to buy those hospitals, there big facilities so they have to repay that debt, which

isn’t HCA’s situation at the moment, and if you bought a hospital in London and everybody

else is paying a high premium price are you going to drop your prices or are you going to

keep them at that level to maximize your revenue? Common sense says that, given that the

nature of economics is that price is determined by demand, and the demand in the HCA

hospitals at the moment is high then why would you drop your prices? So no I don’t see that

happening at all.”

The discussion then moved to focus on what the investigation would mean outside of London,

interviewee 3 discussed that the same outcomes are likely:

27

“Outside of London, umm there so one chain is being asked to sell 7 hospitals soothe same

thing applies, so there sold to other hospitals groups, do I think it will drive up competition?

Perhaps in some local areas, but the reality is that health insurers will still negotiate there

hospital tariffs on a nationwide basis. For that reason I say it won’t work because pure

economics says that it won’t work, there will be more transparency in the market but do I

think it will fundamentally reduce the cost of premiums, not significantly.”

This leads to the idea of regulation in the industry, although interviewee 2 agreed with the idea of

regulation in the market he felt it shouldn’t come in the form of the government:

“The regulator wouldn’t be the government I mean at the present time umm it’s like it’s like

selling insurance we’ve got the FCA it would have to be someone like that to do it umm and

umm you’ve got the medical council at the current time and if you do something wrong you

can be struck off by the medical council, umm so it sort of exists to a certain extent.”

From this it is fair to say that this research found the key factors that will affect the growth of the

market are how well insurers control their claims, and the success of cost controlling products such

as open referral. Alongside this the research found that competition between private hospitals and

their cost structure is another crucial area, and although some outcomes of the investigation such as

transparency are definite, the lowering of cost is somewhat disputed. This therefore leads to the

idea developed by interviewee 2 of having an external body to regulate the cost and pricing

structure of private hospitals.

RQ 4: What is the future of the NHS and what policies or techniques can be used to

make private healthcare more attractive and affordable? What systems are used

successfully by other countries?

The future of the NHS

One theme coming from the data is that the NHS is likely to scale down in the future, meaning more

and more primary care will be billable which was discussed by interviewee 3:


“Will it scale down? A lot of NHS treatment to scale down is done privately, so they will outsource knee opps etc to private hospitals, so the patients doesn’t pay put the NHS does, to get them off the waiting list.”

“so gradually bits and pieces will break off and you have to do that so that the core things umm like cancer like heart like hospitalisation with orthopaedic operation that you won’t have to pay for but to fund it you’ll have to pay for other bits so the secondary care the hospitalisation is funded by primary care err across the nation and umm we are going to have to accept that because there is no

“the NHS and our house view of it is that we believe that the NHS will do umm a narrower range of services and probably focus on critical care umm which will mean that either people will have to contribute to the system or it will mean that the availability of non critical care services will largely reduced, which will then cause things like waiting lists to increase massively”

28

other way to do it” “I think it’s going to

become more of a need than a want because of the ageism where were living longer, and because the lack of the public funds to cover that we but we it’s a need that has to be funded in a different way.”

Therefore the research has found, and the interviewees believe that the NHS will have to scale down

the services it offers in the future.

The future of the NHS, and the view from the interviewees that it will scale down led them to discuss

how the NHS will change and the best way to go about it. Interviewee 3 discussed that as a country

the UK are yet to have a discussion about its future:

“The UK I don’t think this country has had an umm big grown up debate about what the

future of the NHS looks like, it is a political sacred cow”

Interviewee 3 then goes on to discuss the importance of the NHS as a political tool which will

become a dubious decision by any political party to alter:

“The Olympic opening ceremony tells you all you need to know how the UK population feels

about the NHS, so umm um doing anything that might errmm affect voters opinions of you is

something that they are running scared off”

The public’s affiliation with the NHS is shown, in the graph previously used below, showing the

countries pride in the system:

(Ipos Mori, 2012)

The magnitude of the NHS as a political instrument is a view shared by interviewee 2, who also

discusses how the government are currently scale down the NHS:

29

“you know the NHS is a political potato you know no party is going to say we are going to

scrap the NHS as it is and do a three way thing because they, the country would be up in

arms so you know I don’t know what’s going to happen”

The conversation with interviewee 2 then moved on to how the government should go about

changing the system:

“the government can’t change it, they don’t have the resources to change it there’s going to

be and umm unless you want to and every working person in this country says umm I don’t

mind paying 70 percent tax of which 30 percent goes to the NHS then there’s no chance”

As already discussed, interviewee 3 suggests that there is a need for both private and public systems

to have a discussion on how to work together:

“but the need to have that debate so that they can be seen to be working together, so the

government can say well we lack in these areas fine, well we can see how we can insure that

risk and create products to meet that potential demand but to do so on a massive basis, so it

has to be a joint effort. Because healthcare is a nationwide issue it is not an insurance issue

and it’s not a taxation or Government Issue it’s a societal issue”

Secondary research also shows that the public believe that government doesn’t have the right

policies for the research going forward:

(Ipos Mori, 2012)

The findings therefore show that the NHS will look to scale down the number of free services they

provide, the research has also shown that due to the high political status of the topic it will be hard

to ever implement change to the NHS due to the high attachment to the service by the population

and therefore it is essential for private healthcare to work with the government and NHS to come up

with the best solution. The research has also backed up the need for a debate on the future due to

the lack of confidence in government policy.

30

Taxation

When asking the interviewees how the government could help to promote private medical insurance

one theme that came up was to reduce the tax paid on the policies, as discussed below by

interviewee 3:

“No I think the government has an opportunity to recognise that employers and individuals

who choose to pay PMI are alleviating the burden of costs on the NHS. So a bit like pensions,

an employer who provides medical insurance, the employer has to pay insurance premium

tax on that premium, has to pay employers national insurance contributions on that

premium, the employees themselves have to pay err benefit in kind taxation on that benefit

to so it’s something that umm relieves the burden on the state yet it gets taxed three

times.”

“The government could encourage employers to offer medical insurance to more staff if

they reduced the cost of it, and employers to tell us that they would like to cover more

under my PMI plan than just the ones I do at the moment but I can’t afford it. The NHS its

self acknowledges that if you made medical insurance illegal the 10 to 12% of the population

who are covered by it, the simply do not have the capacity to provide that care and it would

literally break the NHS overnight.”

Interviewee 1 suggested that although it may encourage companies it would have little impact upon

individuals due the costs being far too high:

“Going back to Maggie Thatcher she introduced tax relief on PMI for individuals, labour

came in and scrapped it. Would tax relief invigorate people to buy it? It would probably help

those who have it because they save 2.5% umm would it encourage other people to buy it, it

might but the problem is the premiums are so high.”

Interviewee 1 also argues that the idea of reducing tax for individuals is probably not feasible but

would work for companies:

“Again there are some difficult questions in the individual market because in effect it could

be argues that, and it feels or could be seen to be given a tax break to those who can afford

it i.e. the rich, which is not politically always palatable in the current climate, umm but that’s

because politicians are not actually good at selling the counter argument which is actually

these people if they do that everybody else has to pay less tax because umm there not being

treated on the NHS, so in an employer setting its more easy because you’re talking about

tinkering with tax rules, which umm I think most people will say that’s a good idea, I think

most people on the street would say well if more companies provide private healthcare

then that’s a good thing.”

The findings are therefore that reducing taxation on companies would be beneficial and is likely to

increase the demand for the product; however it wouldn’t have the same effect if the government

were to reduce the tax on individual’s policies.

31

Foreign Systems

As suggested by interviewee 2 “the future of it is seen outside of the UK. So in other words what I

mean by that the model that we have in the UK at the moment is unaffordable both in the public

and the private and the present time. We can’t afford the healthcare of our nation mainly because

people are living longer” and this was a trend that came up throughout the data. The systems

discussed by the interviewees were Australia, Holland and Germany. Interviewee 2 argued that

Australia had the best system and suggested it could be implemented in the UK:

“Australia has the best health service in the world without a shadow of a doubt umm if you

look at all the stats if you go on Wikipedia go on wherever you like and it’ll tell you Australia

is the best, its morbidity rates are lower and the reason for it is that it’s a tripartite

agreement and what that means is that its state pays something, its employer pays

something and the individual pays something. That’s the only way forward for this country,

but that will never happen until you take the politics out of it.”

Interviewee 3 also describes the use of a mixed model:

“There’s a more frequent model which is a mixed model which, is a mix between social and

private funding.

“umm and you have to buy a core level and the same in Holland whereby you have to buy a

core level of cover. If you want to top that up your free to do so you know you can have

additional health insurance on top but that’s entirely up to you.”

The interviews therefore show that foreign systems used a mixed model where individuals are

expected to pay directly towards healthcare in that country, which could be used in the UK to reduce

the overall cost of the NHS.

Key Findings

The key finding of this research are therefore that the values of private medical insurance have

become enhanced due to the falling NHS satisfaction levels, however this hasn’t meant growth in

the market due to the high cost of the product which means it is still viewed as a luxury product. Due

to these factors the research found that the ways in which to grow the market are through;

innovation, making the product affordable and working with the NHS. Alongside this the factors that

will impact upon growth are how well insurers can control costs and how competitive the market

becomes. The research finally found that the NHS is an incredibly important political tool and

therefore change will need to be vastly debated and the UK should look at systems outside of the

UK. Away from changing the system the government can also promote the product through reducing

the tax the product encounters.

32

Discussion of Results

RQ 1: Has there been a change in the culture of the target market of private

healthcare? What factors caused the change?

Poor NHS service

The research found that the benefits perceived by the consumer in private healthcare are choice,

convenience and quality of care. This links back to and has been identified in previous research

carried out by Bradbury et al (2012) who suggested the perceived benefits in the product are choice,

control, vulnerability and trust. One of the main findings through the research was the falling service

level of the NHS, which as suggested by Oxtoby (2012) should mean an increase in the use of private

healthcare. This however was not reflected in the research, and the research revealed that in fact

the growth in private healthcare market had decreased. This therefore shows that the demand for

private healthcare is not simply linked to the performance of the NHS and other factors clearly

impact upon the decision to buy the product. The results also show that there has been a change in

the perception of private healthcare, as suggested by Evans et al (2006) & Blythe (2008) a key

component of perception are consumers beliefs. As the results show a change in the consumer’s

beliefs towards the NHS and an enhancement in the believed benefits of private healthcare, it is fair

to say that there is a change in the perception of private healthcare despite the purchase of the

product not replicating that result.

Cost of Private Healthcare

As discussed there has been a change a positive change in the perception for private medical

insurance, however there has been a contraction in the industry. The research discovered that part

of this can be put down to the cost of the product, and the constant rise in the price with it

consistently rising above inflation. This area was heavily focused on by all the respondents however

interviewee 3 put the most emphasis on the effect of the recession. This finding was also displayed

in the literature by Bang (2010) suggesting the cost is growing at an unsustainable pace, and Powell

& Laufer (2010) stating it is rising above inflation. As found private health insurance has always been

viewed as an elitist product, and with the rising cost of the product, especially in times of recession,

the market will struggle to grow. Especially, as the research revealed, the link between purchase and

income and GPD growth. This means that one of the challenges facing the future of private

healthcare and its ability to grow is to offer products that become affordable to a wider population,

otherwise the product will always be viewed as an elitist product and unless it becomes affordable a

wider population will be unable to see the benefits of the product.

Still seen as a luxury product

As previously discussed the research found that one barrier that has prevented people purchasing

private medical insurance is the sheer cost. This is one of the reasons that the product is still viewed

as a luxury good. As identified in the research the expansion of corporate policies is relatively

inexistent meaning that businesses are only offering it to a select number of employees and viewing

it as a luxury. The research also found that the product is now being used more as employee benefit

and a retention tool, which due to the few expansions of policies again is probably being used on a

select number of their working population. The product is therefore seen as a luxury product, and

the very nature of a luxury product is that it correlates to the level of income; this was found in the

research and also in previous projects discussed in the literature. As Propper & Burchardt (1999) and

33

Propper et al (2001) suggest demand for private healthcare is linked to income. The conclusions are

that also the perception of the product has change in terms of the benefits perceived; the products

view as a luxury product still remains.

RQ 2: What is the potential for future private healthcare market growth?

Making the product affordable

As already discussed, one key problem in the market place is the cost of the product. Therefore the

natural place to start in how to grow the market and make it more accessible is to make the product

more affordable. The literature backs up the idea that making it affordable will help to grow the

market with Propper et al (1993) describes that a key determinant for the demand for the product is

financial resource. This suggests that the product is highly price sensitive and therefore reducing the

cost will ultimately lead to a greater purchase of the product. As highlighted by the interviewees the

main problem is the price charged for treatments, the main target for the market should therefore

be to try and manage the cost of treatment as effectively as possible.

Innovation

The main finding of the research and the main discussion around how to grow the market was that it

relies on the industry, and in particular the insurers to become more innovative and produce a wider

range of products that offer different services. In doing this the market will then become more

attractive to a wider and in particular a younger generation. One problem identified with the market

is the lack of younger people paying in, which makes the market more profitable. If the market

becomes more profitable for the insurers the possibility is that it will have a knock on effect of a

lower price due to the reduction in need to charge a high price to more or less break even. As

discussed by the interviewees the innovative products should try and offer different levels of cover

and different types of cover. This will need to be done by changing the perception of the consumer

with the worry being that if a consumer buys any type of cover they will be under the impression

they have what is defined as private medical insurance, which in reality is top cover. Innovation is an

important point because all markets need innovation to grow especially, as the healthcare market is,

when the market is in maturity or decline.

Working with not against the NHS

The findings of the research show that one way in which to grow the market and move towards a

better healthcare system as country is to ensure that the private market works with and not against

the NHS. The literature also suggested it was important for the sectors to work together and Emmer

& Crow described the benefits of having a system that is part public and part private owned. This

shows that the literature dovetails the results to show the benefit of a cooperative system. This was

also a topic discussed by Savas (2000) who suggests it is absolutely vital the government is involved

otherwise the market would be inefficient. However the results show that although a joint effort is

needed the government in terms of the future of private healthcare shouldn’t become too involved.

Another finding was that in fact consumers want a product that supplements the NHS and doesn’t

replace it, that presents an opportunity for the private market to investigate and get opinions from

consumers of what they want the product to actually do for them. It can be drawn from this that to

grow the market the sectors must work together and there is an opportunity for the market to meet

an unfilled consumer demand.

34

RQ3: What factors will impact upon private healthcare market growth?

Controlling claims

This research found that private healthcare market growth is down to how well insurance companies

can control their costs. The research found that one of the main reasons for the rapid expansion in

the cost of the product is due to the large claims costs the insurers have, the large claims costs mean

that the insurers have a tight profit margin and therefore the cost of the product is reflected by the

claims costs. There has been limited research into the factors of private healthcare market growth

and therefore this was not reflected in the literature, however the literature presented in the report

does reflect the cost of the product. Bang (2010) suggested the cost of healthcare is rapidly

increasing which makes it hard for market growth; this was also reflected by Powell & Laufer (2010)

who stated the price of healthcare was much higher than inflation. Therefore with the findings of

this research it can be said that it is important for the market to look at how they can better control

their claims which will in turn reduce the cost of the product. The research has shown that the cost is

such an important factor in the market and it again comes back to innovation, and how well the

market leaders can innovate and come up with new products that control claims better.

Competition

The research also found that the level of competition between private hospitals could become a key

factor in how the market performs. The idea of reducing the costs by the hospitals was somewhat

disputed, however it was agreed that the investigation would at least bring transparency and a more

open market place. The research also found that due to the irregularities in what private hospitals

charge the idea of an independent regulate for the market would help to again create a more fair

market and could help in reducing the costs some hospitals charge. The literature reflected the need

for intervention in the market place with Savas (2000) suggesting that if the healthcare market was

left to the private market it would be inefficient, Hurst (1991) also suggests that regulation of private

healthcare markets abroad is effective in helping provide low cost health insurance. Therefore it can

be said that an independent regulator for private hospitals can be good for the market place and at

the very least produce a more balanced and fair market. The Competition Commission investigation

will be useful for creating more transparency in the market but the remedy for trying to lower the

cost may need altering.

RQ 4: What is the future of the NHS and what policies or techniques can be used to

make private healthcare more attractive and affordable? What systems are used

successfully by other countries?

The future of the NHS

The findings of this research show that the likelihood is that to combat the extreme cost of the NHS

the organisation will look to scale down on the number of free services that it provides, like it has

already done with services such as dentistry. However the research also identified that the NHS is a

hugely sensitive topic and for the government to make any changes to the system would be difficult

due to the risk of losing voters due to the high level of attachment to the organisation. The industry

experts also believed that there is a real need for a proper discussion by all parties involved to

discuss the future of healthcare and that the private healthcare market will have a part to play and

will need to work together with the NHS. The literature on the future of the NHS was extremely

limited, however Emmer & Crow (1999) discussed the benefits of having a hybrid organisation and

35

Timmins (1995) discussed the aim of the NHS is to provide everyone with the best healthcare

available. Therefore there is a huge need for the UK to have a discussion with all parties involved in

how the healthcare system can move forward, and that private healthcare will have an increasing

role to play in the provision of healthcare in the UK and there is an opportunity for the market to

instigate the discussion and create products that will become needed by the population.

Taxation

One key discussion point in the research was the use of taxation by the government as a tool to try

and promote the purchase of private medical insurance. Which comes back again to the fact that the

product is too expensive with the research finding that, especially regarding the purchase of the

product by companies, the reduction in tax would enhance the benefit and the value of the product

to companies. Doorslaer et al (2008) suggested that in Australia the purchase of private insurance is

encouraged through tax incentives; therefore the use of tax incentives is clearly a thought out one

and a potential way to try and off load the burden from the NHS. It is fair to say that the research

has discovered that the cost of the product is massive, and although an increase in the usage of

private healthcare reduces the burden on the NHS the government is doing very little to encourage

the purchase of the product. Taxation has been established as a good way in which the government

can promote the purchase of private insurance which will, in the long run reduce the government

expenditure in that less will need to be spent on the NHS.

Foreign systems

The findings of the research show that the answer to creating a better healthcare system in the UK is

to look at systems outside of the country and try and implement some form of what is used abroad.

The research found that the best idea would be to form a mixed model whereby individuals are

expected to pay directly towards their own healthcare, be it in the form of taxes or in the form of

purchasing private insurance. Okma et al (2011) suggest that the Netherlands has this system

whereby all individuals are expected to pay towards government run healthcare as well as having

private insurance. Okma et al also states the same sort of system works in Australia where a mix of

public and private healthcare is used. With Australia being praised by the interviewees as one of the

best systems in the world, the UK could certainly look to gleam ways in which to emulate the system

over here. The main problem with the NHS is the cost and the government expenditure that is

required to run it and therefore using a mixed model that means the public pay directly for

healthcare may help overcome the funding problem of the system.

36

Conclusion, Recommendations, Limitations and Future Research The literature set out that if there was a change in consumer perception and attitude it would be

because there has been a change in consumer’s beliefs and intentions. The research found that part

of this had change in that their beliefs in what the NHS offered has changed yet their intentions have

not. Also discovered in the literature was the implication that falling satisfaction with the NHS would

cause a higher demand for private healthcare as the review discovered service levels were key to

retention, and that individuals are pushed towards private healthcare. However this was not

replicated in the findings as the research found that there has not been an increase in the market, it

found that the demand may be there but due to the cost there is not the financial resource to

purchase the product. Which was also showed in the literature and Propper & Burchardt (1999)

suggests financial resources are key to demand for private healthcare, which was found and

identified in this research.

The literature and Propper (2001) suggested that the UK needed a re think in how it splits its

healthcare, this was also found through the research but the research identified the political

implications of any governmental change meaning that there may be some time delay if they were

to change the system. The literature also found the same perceived benefits for the product as was

found from the research with that being mainly choice and control. The main findings of the project

that were not backed up by the literature are the ways in which to grow the market. This project

identified the following recommendations in this area:

1. There needs to be greater innovation in the market to create a wider range of products.

2. Cost of the product needs to be reduced and become more affordable in order to grow the

market.

3. Introduce an independent regulator to control how private hospitals bill for their treatment

and the price they charge.

Limitations This project does however have potential limitations to its effectiveness; due to time constraints the

sample size of the interviews was limited to three. However if the project were to use more

interviews then the findings and views would be more concrete if it was backed up by a number of

interviewees. Also the project, had to rely on secondary data to predict and show the consumers

view, however to make it more relevant and indentify specific problems the project would of liked to

gain more primary data in this area.

Usefulness To summarise this project has identified that private healthcare, as of yet is not more of a need than

a want, however it has established that in the future the use of private healthcare will become more

important and will therefore become more of a need. The research has also identified ways in which

the market could bring growth back in to the market, this project has also been useful in identifying

potential ways and systems the government may have to implement when spending on the NHS

increases past a feasible point, despite the high political status of this topic the research has

identified that this is an ever increasing problem and cannot be ignored.

37

Future Research

The findings of this research have opened up a number of areas for future research. One area that

can be explored is the pitfalls and benefits of the systems abroad, the grass is always greener on the

other side and before the UK look to adopt systems from other countries there needs to be research

in to how consumers feel about the systems abroad and identify whether every part of the system is

transferable to the UK. Other future research would be to talk to government officials and managers

of the NHS in how they see the future of the organisation and what role they feel private healthcare

has to play, due to lack of contacts in this area and time constraints this was unachievable in this

project.

38

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