The Business of Private Practice
– The Current State of Play

By Ray Stanbridge

An increasing body of evidence suggests that consultant private practice income may have fallen by between 0 – 5% nationally between 2002 and 2003. In central London this figure is much higher, with suggestions that a 15% fall has not been uncommon.

There has been pressure on fees and costs. The number of private patients seems to have fallen for many consultants for three major reasons. Firstly, it seems that the number of overseas patients has fallen, possibly as a repercussion of the Iraq War. Secondly, there is evidence that the PMI market is under pressure and that there is little growth. Thirdly, there is a perception amongst many that the NHS must be improving, simply as a result of the large volumes of cash thrown at it. This may be true in dissuading patients to seek immediate private treatment. There is however, a view amongst some, that there is a pent up demand for private medicine that will materialise if and when the expectations of improvement in the NHS do not materialise.

Costs are rising for many consultants in a number of areas. Notable amongst these are the costs of medical indemnity insurance, the costs of consulting rooms and staff costs. Private hospitals, who themselves are under pressure, are seeking to increase service charges to consultants, and in a number of cases have succeeded. In addition, the Revenue is seeking to vigorously apply PAYE rules to virtually all employers/associates/assistants of consultants. This in turn is pushing up costs, with the additional burden of employer’s national insurance.

In addition to the fee and cost pressure, there is, of course a rising burden of taxation which is putting pressure on consultant take home pay from private practice. Sample reviews suggest that an increased tax burden of 4 -5p in the £ since 1997 is not totally uncommon.

The impact of these changes is that some consultants have decided to give up their private practices, take up the new contracts and focus on their NHS activities. This in turn has created opportunities for others who are seriously interested in private medicine. Despite the above gloom, there is some evidence that those who are seriously interested in providing a quality and efficient service are actually increasing their income.

What then is the prognosis? Certainly for the next year or so it does seem that the pressure described above will continue and private practice incomes for many will remain under pressure.

In the longer term, the future does appear brighter for those who are prepared to invest in the business aspects of their private practices. “Added value” services and products, recognition as “clinics”, improved standards of clinical governance, development of negotiation skills and a keen marketing eye to pursue new market opportunities can bring rewards. These are not only in the private sector – but in providing efficient and effective services to the NHS.

The boom time for private practice for both hospitals and consultants seem to be over for the time being. There will be rationalisation over the next few years. Those who survive this rationalisation may look forward to a brighter future if their business acumen matches their medical skills.

Mr Stanbridge runs an accountancy, finance and tax advisory service specialising in the medical profession. He can be contacted on 01522-546606,
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