The coming year promises to be a tough one for the private healthcare sector, according to a new report from analyst Laing and Buisson.
It faces stagnant funding and the likely referral of its market to the Competition Commission following a review by the Office of Fair Trading (OFT).
The analyst also claimed the market now holds an excess capacity and competition from NHS private patient units.
Laing and Buisson's Healthcare Market Review revealed revenues for private hospitals generated in 2010 were static at £3.84bn.
However, spending by private medical insurance (PMI) providers continued to fall and accounted for only 59% of the total (£2.3bn), compared to 65% in 2005.
This was highlighted by Bupa's recent dispute with BMI Healthcare over cost of services which saw the insurer temporarily cut 37 BMI facilities from its approved list.
An agreement has since been reached but three hospitals remain excluded from Bupa patients.
The report warned that the sector could now have to brace itself for a further period of economic sloth and the fallout of public spending austerity after a previous period of ‘fair' growth.
Although NHS patients using private facilities now account for a quarter of hospital income (compared to 14% in 2005) generating £957m, it suggested that this source may be reaching a cyclical high.
Meanwhile, incomes from self funding patients grew 0.5% to £534m (14% of the total).
At the middle of 2011 a record 515 independent medical hospitals were open compared with 454 in mid-2010.
In addition, 73 private patient units within NHS hospitals were also competing for a slice of the private healthcare market.
Philip Blackburn, co-author of the report, acknowledged many of these hurdles.
"There are certainly near term challenges for service providers of private acute healthcare under current market conditions, but also opportunities in the longer term," he said.
"Delivery efficiencies from providers are being solicited, not least from medical insurers which are seeking savings to pass on to their customers, and the recent OFT report, which found evidence of potential competition limiters in the provision of private healthcare by hospitals and consultants."
