Despite elimination of most references to ‘competition' in last spring's Health & Social Care Bill, independent care providers are increasing their share of state-funded provision.
Healthcare intelligence provider Laing & Buisson's ‘Mental Health & Specialist Care Services UK Market Report' said the value of outsourced provision grew by £1.1bn in 2011 taking the total value of independent sector to £8.8bn in the financial year 2010/11.
This growth came in spite of very public announcements signalling the desire to make significant savings in public sector spending, expected to lead to forced fee decreases, smaller referral volumes and tighter profit margins.
The biggest gains for independent sector providers were seen in social care services. Increasing from a 79% presence to an 82% market share, independently operated care homes for learning disabled and mentally ill adults saw value increase from £2.9bn to £3.2bn.
The supply of non-residential care for learning disabled and mentally ill adults rose to £2.3bn (from £1.6bn) giving independent providers a 64% share of the market. Growth was also seen among providers of children's care, fostering services and specialist education facilities.
However, savings being sought by NHS commissioners have taken their toll on independent mental health hospitals where for the first time since 1988 there was a dip in market value to £1.08bn (2010: £1.12bn) while the market share remained steady at 27%.
One action fuelling this backward step, the report argues, is a tendency for public sector agencies to ‘sweat' their own assets by directing demand to their in-house provision in preference to outsourcing.
The report states: "There have been reports of this happening across all sectors, most notably in the sudden ‘repatriation' of NHS funded patients who had hitherto been receiving secure treatment at Priory Group's hospitals during the third quarter of 2011.
"To the extent that such actions lead to inappropriate placements, however, the impact is likely to be short term."
Laing & Buisson believes these pressures will be mitigated by a counter-tendency for the public sector to close assets which have become too expensive to maintain.
William Laing author of the report and chief executive of Laing & Buisson, said: "The current period of severe financial pressure may well be accompanied by a further underlying shift from public to independent provision.
"This phenomenon is illustrated by recent trends in children's homes capacity and the segment most ripe for further consolidation is social care - particularly care homes for learning disabled and mental health where the top ten providers have just 13% capacity.
"The outcome for the mental health hospital sector is more difficult to judge, however, since public and independent sector prices appear to be more closely aligned and public sector providers receive
substantial pension subsidies from central government.
"Nonetheless, mental health hospitals have stood out in recent years as the most profitable segment of the broad specialist care services sector. And despite the knocks they have experienced this year they remain to the most profitable segment."
