In mental health services the NHS reliance on private providers can be much greater. Department of Health figures compiled by the Nuffield Trust showed a massive 24% of mental health spending was from non-NHS providers in 2012/13, and that private provision was growing at the expense of the NHS:
“funding for independent sector mental health service providers increased by 15 per cent in real terms between 2011/12 and 2012/13 alone, while funding for NHS-provided mental health services decreased by 1 per cent”. (page 6)
Laing & Buisson estimate 30% of mental health hospital capacity is now in the private sector, and revenue is increasing. A report early in 2018 notes:
“robust revenue growth for independent mental health hospitals in recent years, amounting to 12% in 2015 and 4% in 2016, though pressure on prices by financially stretched NHS agencies has meant some diminution in profit margins. […]
… the main driver continues to be the long-term trend towards NHS outsourcing of non-generic mental health hospital treatment, which shows no sign of abating. CCG block contracts with NHS Mental Health Trusts, which give the Trusts little incentive to expand their own in-patient capacity or even maintain what they have, limited NHS capital budgets, and risk averse behaviour of Trusts all contribute to the growth in demand for independent acute mental health bed capacity.”
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However the imbalance is even more dramatic in child and adolescent mental health: recent reports reveal that no less than 44% of the £355m NHS spending on CAMHS care goes to private providers, and figures given in parliament last November again show how the private sector spend has grown by 27% over 5 years from £122m to £156m, although spending on NHS providers has risen faster (by 40%).
The private sector domination is most complete in the provision of “locked ward rehabilitation”, in which a massive 97% of a £304m market in 2015 was held by private companies, the largest of which was the (now merged) Cygnet/Cambian (20-30%), with substantial involvement also of Acadia (Priory Group) with 10-20% and Huntercombe with 5-10%.
The merged Cygnet in 2017 reported operating 2,400 beds across 100 sites, with over 6,000 staff. In the summer of 2018 it also took over the Danshell Group, operating 25 units with 288 beds for adults with learning difficulties. While Cygnet Health Care recorded a loss of £9.4m on turnover of £121m in 2017, the Group reported a very healthy profit of £40m on turnover of £334m.
The increased proportional spend on private providers has made them even more dependent on funding from the NHS to prop up their balance sheets: the most recent accounts of the largest mental health provider, the Priory Group, show that 52% of its income of almost £800m came from the NHS, and another 38% from social care – a total of 90%.
According to the Competition and Markets Authority the market for mental health services was worth a total of £15.9 billion in 2015, 275 of which was for hospital services, and the private hospital sector had grown by 8% in the previous five years, while NHS capacity had been cut by 23%.
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