NHS mental health trusts could, according to a report in HSJ, face regulatory action for not reducing the time patients spend in units a long way from home (known as ‘out of area placements’).
There is little to argue about with a policy that is aimed at ending by 2020/21 what are known in NHS-speak as ‘out of area placements’ where patients are admitted to facilities miles away from friends and families.
An unexpected side-effect of ending out of area placements, however, is the potential for a windfall gain for firms that have recently made big investments in NHS mental health services. Probably the most notable of these investors are the US mental healthcare giants Acadia Healthcare and Universal Health Services Inc (UHS).
Acadia Healthcare spent £1.3 billion in 2016 to add The Priory Group to its existing investment in Partnerships in Care. UHS has, more recently, spent £377 million to add the adult mental health services division of Cambian Healthcare to Cygnet Health Care.
These providers may suddenly find themselves in a much stronger negotiating position with NHS purchasers, including NHS England, local CCGs and NHS mental health trusts.
A little bit of background may be helpful to understand this.
Over the past decade, and more, as NHS inpatient mental health beds have reduced, private sector beds have become increasingly important for NHS inpatient mental health services.
Patients that require an admission, and cannot be admitted to their local NHS mental health trust, are typically placed in the private sector. Facilities operated by other NHS mental health trusts are rarely an option for these patients as they are also likely to be full.
In effect, private providers compete with each other for those patients that cannot be admitted to NHS mental health trust facilities in what is referred to as a ‘spillover market’.
Case managers will try to place patients requiring a non-NHS admission in the nearest, suitable private facility, but high occupancy rates at many private facilities mean that patients are placed further and further afield.
However, the further afield that patients are placed, the more private providers that case managers can potentially choose between (based on quality, price or other factors).
The Competition and Markets Authority (CMA) in reviewing Acadia Healthcare’s acquisition of The Priory Group, and UHS/Cygnet’s acquisition of Cambian’s adult services division found that:
in medium secure services, private facilities competed with other facilities that were located up to 125-150 miles away (e.g. a facility in London would compete with one in Doncaster);
in low secure services, private facilities competed with other facilities that were located up to 100-125 miles away (e.g. a facility in London would compete with one in Birmingham);
in long-term mental health services, private facilities competed with other facilities that were located up to 60 miles away (e.g. a facility in London would compete with one in Portsmouth).
If out-of-area placements are reduced, this will reduce the extent to which more distant facilities compete with one another for patients. This is because these further away facilities will no longer be an alternative for NHS purchasers.
In some localities this may not make any difference. A plurality of private providers who are closely located to one another will maintain competition for patients that cannot be admitted to their local NHS mental health trust.
However, in other localities, a single provider may have a concentration of facilities, and NHS purchasers’ choice of provider may be limited if the pressure is on to keep patients local. (The CMA will not necessarily have seen this local-level concentration as a problem to date because, as set out above, private providers have been competing with one another over long distances.)
As in any other market, a limited choice between private providers of mental health services can be expected to result in higher prices and/or lower quality as providers take advantage of a stronger market position to increase profits.
Of course, the complexity of the price setting process for NHS mental health services, and the extensive regulatory regime for service quality may mitigate at least some of these effects.
However, you can’t help wondering how much at least some private providers that have recently bought up big in the sector are celebrating today’s announcement.
For smaller providers, who now face the possibility of a tougher CMA review regime for mental health acquisitions as NHS placement policies shrink local markets, there may be less cause to celebrate.