How much money can the NHS earn by selling services overseas?

How much money can the NHS earn by selling services overseas?

Answer: Very little

The press was reporting this in an over hyped way and not much attention was paid to exactly how much money could be earned by NHS hospitals establishing services overseas.

Well, let’s look at some facts and there are 4 key areas to look at.

Reputation and credibility

Not many NHS hospitals are well known overseas and the ones that are probably number fewer than 10.

Most people would mention some of the larger London hospitals such as Great Ormond Street, Royal Brompton, Guys and St Thomas’s, Royal Free, Royal Marsden, Barts, Moorfields, the Imperial and then run out of names they can think of. These also probably have sufficient resources to sustain the long-term effort it will take to establish overseas revenue earning relationships. The Imperial and Guys annual turnover amounts to just over £1bn and the other vary between £400m-£800m.

Any health governing body overseas will only consider names they have heard of and hospitals they may have visited.

Affordability

The NHS would only be interested in countries that can afford to buy health services and build hospitals without requiring any capital investment from the NHS. It costs about $100m to fund a fully serviced, equipped hospital and that’s for 100 beds or less.

This reduces the number of countries that can afford such healthcare to certain oil/gas producing Gulf States and a few others.

Emerging market and developing economies tend to have well developed health care systems even though these are not capable of being funded by the state to the extent of the NHS. These states also have a well-developed system to train doctors’ even though they may not have sufficient numbers. Such states cannot afford to buy services from the NHS except at vastly reduced costs, which defeats the objective!

Competition

Since we’re looking at a handful of countries that can afford such healthcare, its not surprising that the leading US hospitals such as the Mayo Clinic, John Hopkins, Cleveland Clinic etc have already established relationships in these countries and also have much larger budgets to spend on marketing and international relations. For example, these 3 US hospitals each have an annual turnover of ranging from $6bn-$8bn!

So the handful of NHS hospitals has to compete with these behemoths although some such as the Imperial and Moorfields already have established services in the Gulf. It’s not an easy task and the time it takes to establish any service is much longer than anyone thinks!

Profitability

Finally, let’s look at how much profit can be generated from a hospital. If we consider a 100 bed private hospital, the expected turnover in a developed economy would range from £60m-£80m annually and the profits could range from 10%-20%.

However, in a developing economy, the hospital economy would depend on local factors such as what the locals would want to pay so the turnover would be far less than in the UK. If they have to pay UK/US prices, they may as well travel there!

Given that any service the NHS sets up has to be jointly with a private operator or the local health authority (to bear the capital costs), a fair amount of the profits would have to go them.

So we are now looking at profits of well under £10m a year that a NHS hospital could repatriate for use on the NHS public at home. In fact, it was reported that Moorfields earned about £1m from its Gulf services.

Such amounts would be reasonable for the hospital concerned but would not make a dent in the overall NHS budget of £110bn.

It’s new stories such as these that take away the focus of what the real funding issues are in the NHS and the tax paying public should realise that there are no panaceas and quick funding solutions for the NHS.

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