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PwC report reveals approximately £1.8 trillion UK market potential for healthcare delivery private and public sector partnerships
- From 2010 to 2020, spending on healthcare service delivery will be approximately £1.8 trillion in total
- From 2010 to 2020, spending on health infrastructure in the UK will be approximately £94.2 billion in total
- Spending as a percent of GDP in the UK is expected to increase to 10 percent in 2020, up from 9 percent in 2010
- Spending on healthcare among the OECD and BRIC nations will grow by 50 percent between 2010 and 2020, amounting to a cumulative total of more than $71 trillion
The UK market potential for private and public sector partnerships (PPP) in healthcare delivery has been valued at approximately £1.8 trillion, according to PwC’s latest report - Build and Beyond: The (r)evolution of healthcare PPPs. Spending on healthcare among the OECD and BRIC nations will grow by 50 percent between 2010 and 2020, amounting to a cumulative total of more than $71 trillion, according to estimates from PwC's Health Research InstituteHeHe. Health spending is rising faster than GDP, magnifying gaps in national and local budget deficits and spurring governments to look to the private sector for ways to get a better value for taxpayers’ money.
PwC suggests that public and private sector partnerships are emerging as a model for financing and managing healthcare delivery globally and could create a multi-trillion global market for private companies and investors, relieve the burden on taxpayers and offer better quality health systems.
Health PPPs in Spain have already proven to save governments as much as 25 percent of healthcare costs. PwC’s report provides evidence that international interest in health PPPs is increasing, and the market is positioned for rapid growth over the next ten years.
Ian Wootton, UK head of health and global PPP health leader, PwC commented:
“The impact for UK PPP players will be two fold, firstly as the UK faces the challenge of delivering greater efficiency and with the “any willing provider” policy, broader opportunities will open up for UK public private partnerships. Secondly there will be a growing international market where they can apply their experience.
“PPPs are challenging the notion that private healthcare is for the rich, and public healthcare is for the poor. Rather than creating or exacerbating inequities in care, PPPs can equalise care to all populations. The keys to the success of PPPs in future will be in contracts that clearly establish performance goals around quality and health outcomes.”
Based on a country-by-country analysis of health spending trends and projections, PwC has determined the following:
- By 2020, spending on health infrastructure among the OECD1 countries and BRIC nations of Brazil, Russia, India and China will increase to $397 billion annually, up from $263 billion today. However, the larger market for health PPPs will be in non-infrastructure spending, estimated to be more than $7.5 trillion annually, up from $5 trillion in 2010.
- Between 2010 and 2020, the OECD and BRIC nations will spend cumulatively $3.6 trillion on health infrastructure and $68.1 trillion on non-infrastructure health spending.
- Health spending in the United States accounts for approximately half of all health spending among OECD nations, but the biggest growth will be outside of the U.S. According to PwC projections, the countries that are expected to have the highest health spending growth between 2010 and 2020 are China, where health spending is expected to increase by 166 percent, and India, which will see a 140 percent increase.
- Among OECD countries, health spending as a percent of GDP will increase to 14.4 percent by 2020, up from 9.9 percent in 2010. Among BRIC nations, health spending as a percent of GDP is expected to increase to 6.2 percent in 2020, up from 5.4 percent in 2010 as their economies grow and they build out their health systems. In actual spending, this amounts to a 117 percent increase in spending over the decade, with China leading the way in spending increases.
David Levy, MD, global health leader, PwC, said:
“Public-private partnerships take health reform to a new level by increasing access and quality of care and creating accountability for health systems among groups that previously haven’t had appropriate incentives to work together.”
In 2010, a number of record-setting PPPs formed across three continents as a way to finance hospital infrastructure, including a new 700-bed Karolinska Solna University Hospital in Stockholm, Sweden, which is estimated to be the largest hospital PPP in the world. Other deals were announced or reached financial close in Canada, Mexico, Africa and Spain.
While these landmark deals remain largely dominated by infrastructure projects, they are also expanding the market for private capital and expertise in health services, says PwC. As the scope of the partnership projects in healthcare grows, so does the size of the potential market for private organisations.
Ian Wootton, UK head of health and global PPP health leader, PwC concluded:
“There is no country in the world where healthcare is financed entirely by government. Each territory is looking for the appropriate balance of public and private resources and has different motivations for looking at PPP solutions whether it is to share risk, expand capacity, accelerate innovation or increase access. PwC’s experience is that health PPPs are a model with an equally compelling business case from New York to New Delhi, from Spain to Singapore and from Montreal to Munich.”
· A full copy of PwC’s report including a full explanation of market sizing methodology is available for download at www.pwc.com/healthppp.
· OECD is the Organisation for Economic Cooperation and Development, which includes 33 countries. PwC modelled spending projections for 25 OECD countries. Chile, Estonia, Hungary, Israel, Korea, Slovak Republic, Slovenia and Turkey were excluded because of lack of historical data.
The PPP Health Model
A health services PPP can be described as a long-term contract (typically 15 to 30 years) between a public-sector authority and one or more private sector companies operating as a legal entity. The government provides the strength of its purchasing power, outlines goals for an optimal health system, and empowers private enterprise to innovate, build, maintain and/or manage delivery of the agreed-upon services over the term of the contract. The private sector receives payment for its services and assumes substantial financial, technical and operational risk while benefitting from the upside potential of shared cost savings.
The private entity is comprised of any combination of participants who have a vested interest in working together to provide core competencies in operations, technology, funding and technical expertise. The opportunity for multi-sector market participants includes hospital providers and physician groups, technology companies, pharmaceutical and medical device companies, private health insurers, home health or hospice organisations, facilities managers and construction firms, with funding sources that could include banks, private equity firms, philanthropists and pension fund managers.
Health Research Institute
PwC Health Research Institute (HRI) provides new intelligence, perspectives, and analysis on trends affecting all health-related industries, including healthcare providers, pharmaceuticals, health and life sciences, and payers. HRI helps executive decision-makers and stakeholders navigate change through a process of fact-based research and collaborative exchange that draws on a network of more than 3,000 professionals with day-to-day experience in the health industries. HRI is part of PwC's larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum.
About PwC Global Healthcare
PwC Global Healthcare works with leading healthcare providers, payors and health sciences organisations across the globe to provide business insights and real-time health solutions. We help public and private executives meet the challenges of their healthcare agendas including regulatory reform, revolution in care and the impact of new science. Our global network of healthcare professionals provide assurance, tax and business advisory services paired with industry experience and a deep understanding of the entire healthcare ecosystem and the dynamics that drive it. We invest heavily in bringing industry-wide, global perspectives to create sustainable healthcare systems for our clients.
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