Creating a brighter future

23 June 2015 - Alex Perry, General Manager, Bupa UK, speaking at The Private Healthcare Summit
Alex Perry

Good morning ladies and gentleman. I’m very pleased to be addressing this conference today, thank you for inviting me to speak once again.

As you know I am here to talk about a brighter future for our sector. I am a passionate believer in the value that we bring to our customers and to wider society, and I would dearly love to come here with a positive message about the great things we are doing and the renewed signs of life in our sector.

But when thinking about what to say, as I look back over developments in the past year, I have to say we still have a lot of work to do to make our market good again.

Last year, I spoke about the toxic cocktail that the private healthcare sector faces - rising costs, a lack of innovation and a seeming inability to prove and communicate the quality of care that we deliver – convincing customers of the value of choosing private healthcare, when they have a free at the point of use alternative in the NHS.

So this year, surely we should have reasons to believe in a brighter future for our sector? After all, the UK economy is growing at the fastest rate of the advanced economies, our country’s population growth has reached record levels and employment is also at a record high.

But, our market is not showing such signs of fast growth.

In fact, the private healthcare sector is in no better place than it was a year ago. The challenges are real and the need for fundamental reform is as pressing as ever.

We don’t yet have the latest analysis of the market from Laing Buisson, which they may speak about in the next session, but we expect them to report a further decline, with the lowest ever proportion of lives covered in the UK population. Another year of decline and of a shrinking market. This is both a threat to our sector from a commercial perspective and ultimately, a betrayal of our purpose – denying more patients the opportunity to benefit from the great healthcare that we can deliver for them.

However, there are some signs of change in the market. Even with the ongoing Competition and Markets Authority review of the Central London market, some progress is being made to embed the CMA’s ruling to improve information, quality and transparency for customers.

We are making progress to contain our costs. We are making progress to publish better information about doctors, hospital outcomes and costs through the Private Healthcare Information Network, which has been enshrined in law. These both will help our market and are fundamental elements to ensure its future survival.

The fact that progress is being made in these vital measures is heartening. Because let’s not forget the most important message from the CMA market investigation. Customers are losing out. If we do not change, make no mistake, they will, as we have seen for years, continue to walk away. To be frank, in the face of this our actions appear to be complacent as a sector.

And let us not forget this is happening against a backdrop of enormous financial burdens on a creaking public healthcare system. I’m sure we have all read the figures – our public system is facing a £30billion per year funding gap by 2020, some say it’s nearer to £40bn. The government may have committed to add £8bn of extra funding, but the system still needs to find efficiencies of some £22bn. And this is on top of another £20bn efficiency drive that the NHS has just completed.

With the best will in the world, the sums simply don’t add up. Private funding could really help the public system, but we haven’t grasped the opportunity to grow and play our part in making healthcare in the UK sustainable.

We face into both the public and private health systems; and we cannot be complacent about the future of either.

But, I wouldn’t be standing here today if I did not believe in a brighter future for private healthcare. I have a genuine desire to see a growing UK private system delivering world-class care.

So now, I want to focus on the opportunity.

I firmly believe that there is a good way forward. I am certain we can turn this opportunity into a reality if we put aside the historic divisions which have led us as a sector to chase short-term profit over long-term growth, driving up cost, investing too little in quality, value, and playing our proper role in the UK health system.

We need to work together on a shared agenda for:

  • Improving value and quality in private healthcare
  • Putting the customer at the heart of our industry and being more open and transparent than ever before about what we offer
  • Fundamentally changing the market context

This is the only way we can build a road to a brighter future.

Number 1: Improving value in private healthcare

We know people do want private healthcare and are willing to pay for it. But quite rightly they are demanding from us for to control the costs of their premium.

It’s a harsh reality that we simply cannot expect customers to continue paying increasingly higher prices, without explaining what they are getting for their money. If we get this right the prize for us as a sector is clear.

At the end of 2014, Bupa published Prescription for Growth. We said that if we could cooperate on designing and implementing new ways of working to offer our customers transparency and value for money, we could bring £2billion of new funding a year into the sector. We also said that increased spending on private healthcare could free up to £1.1billion of NHS resources a year by 2025: an important and much needed contribution to UK healthcare, given what I said a few minutes ago.

And this is our challenge. I can’t put it to you any more powerfully than in a letter from one of our customers earlier this year:

“It is with deep regret that I have to cancel my insurance after many years’ membership. The eye watering inflation; inflation busting increase in this year’s premium has finally made continued membership prohibitive. In just four years the premiums have more than doubled.

"With so much discussion in the media at the moment concerning the relationship between the NHS and private medicine and how private medicine could play a substantial part of our overall medical cover, heaven knows what the future will hold if these are the sort of costs we can look forward to.”

Of course, we accept that there is much that we should be doing. We have been very demanding of ourselves to restructure our business and lean our operation. Last year we delivered cost savings of £30m from improvements to streamlining our operations and processes.

But it is important that we all play our part in meeting this cost challenge – both insurers and hospitals engaging constructively in partnership. Our long-term agreement with Spire hospitals is one example of how together we can find a better way forward, making patient benefits go further, adding value for our customers and demonstrating the benefits of private healthcare.

We will be looking to work with our other hospital providers in a similar way. Some may be less willing to collaborate, but we will continue to push hard for better value for our members. There is no alternative if our sector is to survive.

Last year we delivered, on average, the lowest premium increase for our insurance customers since 2011. For our renewing corporate customers over half had their premiums either reduced or held level meaning they saw some of the lowest premium increases on record. In response to our cost containment some major corporates have had the confidence to extend health insurance across the whole workforce – tens of thousands of new lives.

And yet, like the customer complaint I read out a moment ago, our customers are entitled to ask why their premiums should be increasing at all. General inflation is at a historically low rate and almost negligible – yet private healthcare costs continue to rise. People are reaching the tipping point for the amount they are prepared to spend on private healthcare and the consumer market will go into free-fall at some point in the next 5-10 years. It has to become not only more affordable but more accessible and more relevant to more people. Which brings me to the importance of putting the customer at the heart of our sector.

Number 2: Being customer–focused

Value for money is not just about price. It is also about winning the trust of our shared customers and our potential customers.

The measures stipulated by the CMA focus on increasing quality, transparency and ultimately improving our customers’ experience so that they can trust in the quality of service they receive.

Because let’s be honest, we don’t make it easy for our customers. I don’t think it’s an exaggeration to say that we’re one of the last industries to realise that improving the customer’s experience should be our driving force for change. Consider how we expect our customers to choose their doctor with limited information, co-ordinate their own care and then at the end face unexpected short falls.

Driving better value and being much more customer-focused must be our building blocks for growth. But, these alone will not build the road to the growth that we need.

Number 3: Changing the market context

In order to transform the future of our sector we need to fundamentally change the market landscape.

We have not only the opportunity, but also the mandate to lead important and far-reaching conversations about the whole UK health system and the vital role the UK private healthcare market plays and could play.

I think it was Einstein who said: that the definition of insanity is “doing the same thing over and over again and expecting different results”.

And to be honest, we won’t change the structural dynamics in our market by continuing to do or say the same things.

We need to cut through the accusations and myths that surround private healthcare. We need to positively promote the impact we all can, and do, have on the nation’s health and lives. The value we bring to our customers. The quality of care we deliver to patients. And the vital contribution the sector makes to the UK healthcare system and the economy.

We need to do this with confidence, clarity and most importantly collectively.

As a sector we need to tell a compelling story to customers, to healthcare professionals, to the media, and particularly to government and to regulators.

You just have to look at the rejuvenation of the market in other countries to see the range of regulatory and fiscal changes that have succeeded in driving growth.

In Australia the positive impact of removing specific fiscal burdens and introducing proportionate regulation is clear. At every stage of market growth, some government action has initiated this. Australia now has 50% of people covered by health insurance.

However, you only need to look at our own market to see the negative impact that an unfriendly regulatory environment has had.

The conusmer market shrunk by one third since 1997; half a million more people for the NHS to serve at a time of unprecedented funding problems.

Only by working together could we make the case for similar transformative interventions for the UK market as in Australia.

The only way we can truly improve the outlook for our sector is by delivering greater volume growth, bringing more people into our market.

I do believe in a bright future for the private healthcare market but only if we collectively make it happen.

As funders, commissioners and providers in this system, we have a major role to play, but we also know that bringing about the scale of change required, demands that everyone work together. We are ready to make our contribution – and I ask are you ready to make yours?

Together we can bring in a new reality of quality, transparency, value and growth.

We need to prove ourselves ready to create a brighter future for our customers and our sector. Only then will we reach a brighter future.

Thank you.

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