Public and private sector collaboration: how flexible finance can help bridge the gap in healthcare procurement 

November 1, 2022

By Phil Dring, Head of Sales at SAF Solutions 

Earlier this year, I wrote an article discussing the role of asset finance in supporting the NHS which is more relevant than ever as we face ongoing pressures from both the pandemic and as we head into the colder months.

Capacity is a real buzzword in the healthcare sector at the moment, as the surgical backlog continues to climb, reaching record highs of around seven million, largely due to the lack of treatment during the height of the pandemic.

The so-called ‘hidden backlog’ of patients remains a looming challenge for the NHS. Separate to those counted within the seven million registered patients awaiting treatment, there are many more who require care but who have either not yet presented or had referrals delayed, cancelled or due to receive rescheduled appointments after Covid cancellations.

In response to this significant delay, reports show that more than 250,000 patients felt they had no option but to go private for medical treatments.

Private and public sector collaboration 

Former Health Secretary Stephen Dorrell once famously claimed that the NHS’ “best-kept secret” was that it has always been a public/private sector partnership. And as we move into increasingly challenging times, further acknowledgement and activation of this partnership should be called upon to help solve the mounting pressures faced by our health service.

Private healthcare providers across the UK have recorded an influx of enquiries and new patients as further delays to routine operations cause people to opt for paid-for treatment. This is particularly prevalent for cataract surgeries as well as hip and knee replacements.

This is reflective of the seemingly seismic shift in the number of people opting to “go private”, with a 30 per cent increase (from 50,000 in 2019 to 70,000 in 2022) in self-paying procedures since the pandemic.

It’s no secret that the NHS faces ongoing challenges to care delivery, largely due to a lack of theatre capacity and a limited number of doctors, but the pandemic, unfortunately, served to turbocharge these challenges, opening up opportunities for private clinics and hospitals to offer their support.

Public and private sector collaboration came to the fore during the pandemic, whereby independent hospitals throughout England supported the NHS with no profit being made, providing;

  • 8,000 beds
  • 1,200 ventilators
  • 20,000 staff

This resulted in more than three million NHS procedures being delivered by the private sector, including 160,000 life-saving cancer and cardiology treatments. This was a vital cog in the healthcare machine at the time, alleviating some of the pressure on the NHS and helping ensure that vital non-Covid treatment was able to continue in some capacity.

How flexible finance could support healthcare delivery

Having access to market-leading equipment and facilities is key to providing healthcare services that respond to evolving needs. The main stumbling blocks in the public sector are the restrictions around budget allocation, which often prioritise essential works over upgrading or replacing equipment and facilities.

However, private clinics have more scope for modernising and expanding their facilities and upgrading their equipment due to a lack of red tape when it comes to deciding on where and how money should be spent.

As mentioned in my previous article, the UK has more than 6,000 private medical practices that are uniquely placed to support additional diagnostic services and day patient procedures in many of the areas in which the NHS is struggling to deliver care, including;

  • Orthopaedic
  • Ophthalmology
  • Oncology
  • Gynaecology

Alternative procurement pathways 

Medical equipment procurement is an effective way for private practises to generate additional income and expand services, allowing them to respond to evolving needs. Acquiring equipment via a flexible hire agreement means there’s no need to pay for the technology upfront and offers scope for the income generated to exceed the repayment amount. This allows private clinics to treat the acquisition of new equipment as a revenue source, rather than a capital purchase.

Leasing market-leading equipment that aligns with market demand is an effective way for private medical practices to fund expansion into new markets.

There are multiple benefits to leasing medical equipment, such as;

  • Deferring capital acquisition costs and retaining capital within the business
  • Reallocating capital budgets elsewhere
  • Provides cost certainty and accurate financial forecasting
  • Improved resilience during changes in demand
  • Helps ensure best practice and enhances patient experience
  • Opportunities to expand service offerings and create new revenue streams

Tax benefits of leasing

There are also some tax benefits associated with procurement via flexible finance as leasing costs can be offset against tax liability to help incentivise increased investment within the private sector via finance solutions.

When procuring equipment through a flexible finance solution, the total cost of the rental payments due under the agreement are fully tax deductible against the company’s profits, which can go some way to bringing down the total cost of investment. Depending on the funding term of the lease agreement and the equipment being acquired, some customers may also take benefit of capital allowances whereby a portion of the costs associated can also be deducted from taxable profits.

A recent government incentive, the ‘Super Deduction’, is designed to promote investment, the benefits of which can be attained by companies through Hire Purchase agreements. The scheme currently remains in place until March 23 but may be subject to further extension. The incentive allows companies investing in qualifying plant and machinery assets will be able to claim a 130% super-deduction capital allowance on investments as well as a 50% first-year allowance for qualifying special rate assets.

This could allow companies to cut their tax bill by up to 25 pence for every £1 they invest. These tax benefits – when considered alongside spreading the cost through a Hire Purchase agreement – further promote a flexible finance option when compared to an outright capital purchase.

How SAF can help

At SAF Solutions, our team has more than 15 years of experience working closely with the healthcare sector to provide solutions that will empower them to respond to ever-changing demands.

During this challenging time, and with the pressures of the winter season just around the corner, collaboration with the private sector could be what the NHS needs. In response, the private sector must be agile and ready to react to these new demands by ensuring they have best-in-class equipment available and leasing agreements are an ideal solution for helping private providers expand their service offering quickly.

We’re specialists in constructing bespoke finance agreements that align with budget requirements and offer a robust solution.

Please get in touch with me to discuss this in more detail and I’d be happy to help:

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