Welcome to the first of our new series of quarterly HealthInvestor Barometers. Designed to capture, throughout the year, market views on the key issues affecting the sector and its outlook. For the first quarterly Barometer, we are focusing on community services – an area which has attracted a lot of attention over the last year or so. So why is it such a hot topic?

The demand for operational savings and greater efficiencies in clinical service delivery has led to a gradual shift in the provision of care into community settings.

The tendering of a handful of large scale integrated, high value community services contracts over the last couple of years has attracted significant interest form the market.

There is a strong mix of providers interested in participating in the delivery and management of community services; NHS Trusts, Foundation Trusts, the independent sector as well as mutuals and social enterprises. This has also led to a number of new public private joint ventures, particularly where new entrants to the market require specialist skills and local knowledge to bolster their offering. The results of the Barometer are clear. There is undoubtedly optimism about the opportunities available in the community services sector. However, respondents feel quite strongly that there is a negative perception among the NHS and the general public about the involvement of the independent sector in the delivery of these types of services and contracts. Some would say that such negative perceptions continue in relation to the independent sector’s participation in the health sector as a whole, not just in relation to community services specifically . But community services have traditionally been led by small scale social enterprises and mutuals with an NHS background and ethos so inevitably, there will be sensitivity in relation to the threat posed by a plurality of service providers now participating in that market. However, the independent sector’s success rate in community services so far speaks for itself. Negative perceptions aside, NHS organisations no longer dominate this sector and in fact, many of them are willing to partner with the independent sector to make things happen.

So, people feel that the outlook for community services is relatively strong, albeit there may not be as solid a pipeline of integrated contracts in 2013-14 as some hoped there would be.

We hope you find the survey results useful and would welcome any feedback you may have on our approach to the Barometer.

Methodology

The quarterly HealthInvestor Barometers document the opinions of more than 120 private sector health professionals, recorded by telephone interview across the year. The interviews for the first quarterly report took place between 7 January and 11 February.

The graphs in this report show the percentage response to each question. Not all respondents gave answers to all the questions. In cases where a significant number of respondents failed to offer an answer, the graphs acknowledge this fact. The quarterly reports will intermittently reference the results from annual Barometers carried out over two month periods in the summers of 2008-2012. The results were generated by telephone interviews with 101 healthcare specialists and, for comparison purposes, the results have been converted into percentages.

Q Are you optimistic that the coalition will accelerate the expansion of the role of the private sector in the NHS?

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Respondents remain broadly optimistic that the coalition government will oversee an increase in the number of opportunities for the private sector within the health service. Indeed, the pattern mirrors the sentiment of the 2012 Barometer almost exactly. However, it is worth noting that in 2010 more than 80% of respondents were confident this trend would continue – a figure that declined in 2011 but appears to have stabilised. By contrast, respondents are far from convinced the government will make significant progress towards integrating health and social care budgets.

Q When do you think the value of healthcare companies will return to pre-credit crunch levels?

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A return to pre-credit crunch valuations still seems a long way off to readers, with almost all respondents citing 2015+ or ‘don’t know’. Likewise, despite a modest increase in recent M&A activity, those interviewed do not see the market returning to previous levels of activity for some time and possibly never. The survey paints a bleak picture, but perhaps says more about valuations and activity in the pre-crunch market than it does about the mid to long term prospects of the UK health sector.

Q Do you believe that the coalition will take significant steps towards integrating the funding of health and social care?

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Q When do you think the level of healthcare M&A activity will return to pre-credit crunch levels?

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Q 2012 represented a breakthrough year for private sector involvement in community services

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There is a broad recognition that community services is an area of opportunity for the private sector – with few of the respondents failing to voice some enthusiasm about this niche. However, it appears there is still some uncertainty as to whether the independent sector has truly made its breakthrough into community services, and many respondents believe the independent sector’s performance in high profile contracts will be scrutinised closely.

Q How strongly will members of the NHS (and the general public) oppose the independent sector’s involvement in community services?

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The great strength of community services as a market, according to our respondents, is its variety. The difficulty, it seems, will be overcoming negative public and health service sentiment over the private sector’s involvement in the market. Nevertheless, respondents were almost unanimous that the independent sector will be able to add real value to services provided in the community.

Q How optimistic are you that community services will continue to provide major opportunities for the independent sector?

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Q What major advantage, if any, does the independent sector have over the public sector in community services provision?

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Q In what area of community services do you expect the independent sector to be most involved in?

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Q Do you think there are real opportunities for the third sector to compete for community services contracts?

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