This is the second in a three-part series highlighting the recent Council International Health Care Mission to the United Kingdom. Click here to read Part One.
A core tenet of the Nashville health care community is the belief that, any time there is challenge, opportunity is present. While both the U.K. health system’s funding challenges and Brexit contribute to the “overall gloomy” investment outlook, there are bright spots.
Challenged by increasing demand and financial pressures, the U.K. health system presents emerging dynamics and trends, such as the shift to value-based care, the rise of the health care consumer, and the promise of technology to standardize and create efficiencies. These challenges are best addressed by bringing leaders across many sectors and markets together to exchange ideas and collaborate toward solutions.
Panelists and Nashville health care executives at the Council’s study mission, which supports three strategic goals: education, networking and promoting Nashville as the health care industry capital, shared that these solutions are coming from numerous areas – from within the NHS itself, as well as from entrepreneurs and investors within the private sector (from the U.K. and abroad).
Two years ago, faced with a £30 billion funding gap by 2020/21, the government provided the NHS an extra £8 billion in funding, leaving the NHS to fill a £22 billion gap by the end of this decade. To tackle these issues, the NHS launched 50 pilot programs, called vanguards, to test five new models of care:
- Integrated primary and acute care systems
- Multispecialty community providers
- Enhanced health in care homes
- Urgent and emergency care
- Acute care collaborations
The goal is for these “vanguards” to develop a model and create a blueprint for other services to replicate. Given the fragmented nature of the NHS, replicating and creating scalable solutions is challenging, but also needed.
The U.K. health care investment landscape is shaped by the following trends:
- Reversing the growth trend of hospitals. Like the U.S. health system, hospitals represent the costliest places to receive care. Given a fee-for-service model, providers are incentivized to send patients there. In the U.K., there’s increasing demand for hospital-based health care. For example, there’s a 96 percent occupancy rate and a growing use of the ER (5.34 million annual attendees). However, it’s estimated that 22 percent of occupied hospital beds in the NHS are occupied by elderly people who could be cared for by social care (the division of the NHS that provides non-acute health care services). And, there’s a £886 million reported deficit among providers.
- A desire to grow community and home health models of care. This strategy places more responsibility on the patient, represents a more efficient and cost-effective way to receive care, and allows patients to stay at home longer. The funding shortfalls faced by NHS are most severe in the social services setting.
- An emphasis on primary care and certain specialties. Those specialties particularly include cancer, maternity and mental health. Two Nashville companies, HCA Healthcare UK and Acadia Healthcare have developed creative solutions in these areas abroad.
- A push to decrease clinical variation among patients and geographic areas. Despite being a national health system, the U.K. health care system is repeatedly described as being highly fragmented and silo-ed, which only intensifies the challenge of standardization. Similar to the U.S. health care system, the lack of interoperability also adds to this challenge.
- The need for a common technology platform. The NHS lacks a common technology platform, or as one panelist said, “the fragmentation of a technology back bone.” The panelists agree that the NHS does not spend enough on IT to make a meaningful impact and that a smarter, stronger IT system could generate efficiencies and address challenges.
Areas of Opportunities for Investors
Given these trends, investment opportunities in the U.K. are weighted toward the social services sector – such as home health, rehabilitation and community health – and urgent care.
Also, companies that have a consumer-facing brand and can gain scale are attractive to investors. This is important given the rise of Britain’s younger population, which, like U.S. millennials, is demanding faster turnaround times, more convenience and control over their health care dollars.
Companies that can achieve cost savings and efficiencies in nonclinical areas of health care, what we’d call “back-office” functions, were also of interest to investors. Panelists suggested these organizations be large and have economies of scale to be able to help reduce administrative costs, increase productivity and execute efficiencies in a meaningful way.
Other favored sectors include diagnostics, the assessment and management of chronic diseases, dental companies, and imaging providers.
As for private insurance (called PMI), the sector has not grown over the years. Roughly 11 percent of the British population has PMI and that number has held steady. What’s more of a growth driver and area of opportunity, say panelists, is the private pay market. Shaping this trend is an increasing amount of the population that have the means to fund their own health care, want faster turn-around times and desire a more consumer-driven experience.
Cultural Perspectives: How to Be Successful in the U.K.
Given the inherent political tension with U.K. health care – the British people are extremely proud of the NHS and skeptical of privatization – panelists and Nashville entrepreneurs experienced in doing business in the U.K. share the strong belief that companies must position themselves as a partner – not an alternative – to the NHS to be successful. And, having a crystal-clear sense and purpose of mission among employees is critical.
Top-down approaches simply don’t work in the U.K., according to panelists. Instead, their advice is to collaborate with existing resources, people and institutions; be patient, and know that it’s a long-term game.