UK Private Health Insurance Monopsony
Part I:
‘A monopsony is a market form in which only one buyer faces many sellers’.
Last Friday (5th April 2013) was the deadline for hundreds of BUPA recognized private physiotherapy clinics to reregister with BUPA for another 2 years, allowing them to continue to treat BUPA patients. And it was therefore the day I found myself choosing between Physiotherapy London’s rapid or slow demise.
Having not put our fees up in 5 years, despite inflation during that time having risen by 2-3% and the average health insurance premium by 66% within the past decade, I submitted our proposed fee increase, which BUPA immediately declined; refusing even to discuss it. Why? Because they know they don’t have to. They know that they are by far the biggest of the top 4 private health insurance providers (BUPA, AXA PPP, AVIVA & PruHealth), who together account for 90% of the UK PHI market. Any clinic therefore not recognized by BUPA would struggle to survive.
I suspect they know that, with Physiotherapy London’s main clinic being in Canary Wharf, they are on even safer ground, as the majority of Canary Wharf workers have corporate policies with either BUPA or AXA PPP. And they are correct in this assumption. BUPA patients represent such a significant percentage of our patient numbers, that were we not to agree to continue at the same heavily reduced rate, for what would then be 7 years in succession, and therefore be derecognized, we would lose a destabilizing percentage of our patients.
This lose-lose scenario that I therefore find Physiotherapy London to be in is the reason I have finally chosen to speak out.
PHI Perspective..
Before clarifying the very real and present danger of UK PHI’s monopsonistic power, I feel it’s important to also view the market from their perspective, and appreciate some of the positive changes they have made.
During an economic downturn, luxury expenses are the first to be severed by consumers, and as the UK has a National Health Service, private health insurance constitutes a luxury. According to the Association of British Insurers, the number of people covered by health insurance fell by nearly 300,000 between 2009 and 2011. Equally, one of the major issues PHI’s are faced with, is that in a country where universal PHI is not mandatory, sick people are often the primary purchasers of PHI; thereby heavily skewing the costs. Then there is the notable dearth of data by which PHI’s are able to compare providers, in terms of both cost and efficacy; leaving them vulnerable to patient and provider exploitation.
However, if we look at these issues in turn… Whilst the recession may have led to a drop in the numbers taking out PHI, this number is predicted to rocket as the NHS struggles to cope with an aging population. With regards to sickly patients taking out PHI, a number of PHI’s have succeeded in negating this issue by offering discounted premiums to consumers who avoid making a claim within the first year of their policy. And as to the issue of data measurement and collection, this is surely one in which the PHI’s should be taking the lead, in order to ensure absolute uniformity and therefore comparability between providers.
With regards to the positive changes I hinted at earlier, in reality I fear it’s rather more ‘give with one hand, and take away with the other’.. Four years ago BUPA introduced online invoicing. This meant that providers could submit their invoices electronically and therefore receive payment within 7 days. With cash-flow being one of the biggest issues faced by SME’s, this was a hugely positive change. However, whilst the setting up such an electronic system would have undoubtedly come at a substantial cost to BUPA, individual providers are now doing the laborious work presumably formerly carried out by BUPA employees..
Another very recent change involves BUPA’s introduction of a telephone screen, in determining a patient’s need, or otherwise, for physiotherapy. Their former requirement, for all members to seek a GP referral before agreeing to authorize treatment, was a substantial waste of both GP/NHS and patients’ time. However, the contract to provide the telephone screen was apparently ‘won’ by Nuffield Health. And the concerns therefore are these:
What percentage of patients will now be ‘palmed off’ with self-help advice in order to reduce the number of onward referrals for physio, and cost therefore to BUPA.
As Nuffield Health itself has a national chain of physiotherapy clinics, how many patients will now be directed towards their own clinics.
Open Referral:
One change however would appear to have no upside, that of Open Referral. Whilst the absence of any new clauses within the new BUPA physiotherapy contract relating to treatment efficacy, and apparent focus again purely on treatment charges, was of little surprise, there was one worrying new clause:
6. New Clause 12 – Referral
The following new clause shall be added at the end of your Previous Agreement:
“Where, in your judgement, out-patient Physiotherapy treatment will not be effective in treating the Member’s symptoms, and you believe that surgery may be required, then Members shall be referred back to their GP for an open referral and onward referral to a Bupa Recognised consultants (where clinically appropriate).”
We hereby accept the terms and conditions of this Agreement:
| Signature: …………………………………………………… | Signature: …………………………………………………… |
| Name of signatory…………………………………………… | Name of signatory……………………………………………… |
That the largest Private Health Insurer in the country should be ‘vetting’ Consultants on members’ behalf is surely laudable? But the question is this: are ‘BUPA Recognised Consultants’ selected based on treatment efficacy, or simply cost? Do they care if the quality of surgery is good enough to get someone back to work but not back to football? Or is it that, providing mediocre surgery doesn’t necessitate further treatment down the road, and therefore additional expense to them, they know that if patients blame anyone, they’ll blame the surgeon or the hospital; all the while continuing to pay their PHI premiums.
People take out private health insurance for two reasons: speed and choice. That the largest UK PHI should be surreptitiously removing the latter is surely potentially detrimental to patients, and the future quality of private healthcare in this country.
Part II:
In My Opinion:
If I ran BUPA, I too would be looking to stem spiraling costs. But, as ‘competition and consumer supremacy is vital to the successful transformation of any industry’ (Regina Herzlinger: Market Driven Health Care), I’d be promoting consumer choice rather than restricting it, and making the market more transparent rather than opaque.
Rather than telling us what to charge, simply make us publish what we charge. Making providers publish their costs as part of their contractual agreement, for patients to therefore compare, will facilitate comparison and therefore competition. Patients, whose policies are budget-restricted, will readily identify value for money.
Furthermore, hasten patient involvement, by scraping 3rd party purchasing of PHI. Patients are infinitely more sensitive to value and waste where they, rather than their employer, were the primary purchaser of the PHI policy, and therefore more acutely aware of its cost. And perhaps embrace mobile technology by providing PHI members with an App by which they can feedback as to: cost, diagnosis, number of treatments, satisfaction etc etc The data is out there, and waiting rooms are alive with the sound of patients tapping away on their phones and iPads.
And last, but far from least, start using sharper tools to measure efficacy and efficiency than ‘sessional average’. Whilst average number of treatment sessions might initially seem like a fairly useful indicator, it takes very little additional thought to realize that a diabolical clinic could potentially achieve an apparently outstanding average of one appointment; not because patients were rapidly cured, but because they never again wanted to return! By contrast, those clinics, such as our own, which receive a high volume of post op referrals requiring lengthy rehab (e.g. post op ACL repair), will naturally have a higher average. Appointment averages that are not linked to diagnosis are dangerously misleading.
More useful measures might involve the monitoring of the number of patients whose symptoms return at a later date, necessitating further treatment, or where patients commenced their treatment in one clinic, but switched to another (providing the reasons for this are clearly established, rather than presumed) etc etc
Ultimately, at Physiotherapy London, and I’m sure at many other excellence-driven clinics, we would like the primary measure focused on by PHIs to be one of patient satisfaction; but know, sadly, that for economic reasons quality is of least concern to PHIs, with cost at the fore.
In Conclusion:
There’s a story, possibly an urban legend, that the great Henry Ford, of Ford motors, commissioned a team of agents to scour scrapyards and report back as to the state of every panel and part of every Model T Ford they found. Eager to hear how Mr Ford would re-engineer those parts found to have almost universally failed, they dashed back. But, it wasn’t the parts that had failed that he was interested in, it was the parts that had not. One component (the Kingpin) had outlived all other components of every vehicle they found. He immediately ordered for the Kingpin to be engineered to a lower specification.
Whilst patients might, understandably, prefer the Aston Martin equivalent of a Consultant, Physio, Clinic, Hospital, or knee replacement, PHIs prefer Ford. PHI’s are not looking to identify the best, they’re looking to identify the adequate. And, to be honest, understandably so. Healthcare costs are rocketing; so too patients’ expectations. This mismatch is not sustainable in either the NHS or the private sector.
Far more qualified people than me have, and continue to, try to crack this equation. But, I’m fairly certain that battening down the hatches, through price-capping, steering members towards cheaper providers, and restricting numbers of appointments, is not the answer.
People take out private medical insurance for two reasons: speed, and choice. They will therefore eventually get wise to the fact that the latter is being surreptitiously removed.. A far more innovative response will then be required.
Surely there is a way of PHI’s repackaging policies so that those members for whom choice & quality is paramount pay more, whilst those for whom cost is paramount pay less. Creating such a tier system, coupled with a fixed budget per member, might surely both raise standards and lower costs; as the cheaper providers aim to be the best of the cheaper providers, and the quality driven providers aim to be the cheapest of the quality providers. For this to work though, absolute transparency is required, on the part of both the PHI and the provider.
Although the Office of Fair Trading has referred the PHI monopsony issue to the Competitions Commission, I hope they don’t wait until the investigation answers the rhetorical question before seeking to change. Diverting patients away from those clinics, physios, consultants & hospitals whose excellence comes at a cost is, as I type, dismantling the ladder of UK private healthcare excellence, that will potentially take decades to rebuild.
Related links:
http://www.bbc.co.uk/programmes/b006mg74/features/private-health-insurance
http://www.bmj.com/content/346/bmj.f2057
*Background: Physiotherapy London
When I opened Physiotherapy London in 2002 I didn’t just want to open yet another physiotherapy clinic. I wanted to create a Centre of Excellence. Somewhere that proves what I know: that physiotherapy REALLY works! Somewhere that truly clarifies our (and Osteopaths, & Chiropractors) unique ability to fill the gulf between GP & surgery.
Plus it was a time when the healthcare market was noticeably changing, whilst many healthcare providers were failing to. The Internet had arrived, and as a result, more and more patients were arriving for their appointments highly informed as to their probable injury and the treatment options available to them. Apparently, between 1996 and 1997, the year when free access to Medline was made available to the general public online, the number of searches rose that year from 7 million to 120 million.
Internet-savvy patients were becoming increasingly informed and, importantly, increasingly aware of the finite nature of health and the less than infinite knowledge of many healthcare providers. Fuelled daily by media exposes of medical incompetence this informed market was beginning to turn in greater and greater numbers to private healthcare, as a means by which to facilitate choice of provider and speed of provision. Yet, at a time when patients were increasingly focusing on results, providers were continuing to compete solely on cost and location.
The question was, with healthcare being a notoriously inexact science, how could we attempt to make things more exact. The answer I arrived at was this: to only employ THE most highly qualified physiotherapists, and to then allow them to specialize in just one area of the body. Practice makes perfect. Plus, if the Pareto Rule (aka 80/20 principle), means that 80% of patients will present with one of 20 potential conditions/injuries, if each Specialist were to concentrate on their own 20, we would potentially be equally adept at treating the remaining, more obscure, 20%.
As to whether we are achieving our ideals, it is only fitting that patients and the Internet should decide. Former patient recommendations and Internet referrals remain our biggest source of referral. Quality sells itself.