COVID-19 generated, (by necessity), unprecedented co-operation between the NHS and private healthcare providers but what is the legacy for those in private healthcare? DWF's Business Restructuring and Healthcare Teams explore the challenges ahead.
The global pandemic put health as the number one priority on the public's agenda and shone a light on the importance of a first class healthcare system, generating an unprecedented appreciation of the NHS with an outpouring of support not witnessed in most peoples' lifetime.
Memories, however, are short and as the health crisis appears to subside economic challenges move centre stage. Current conundrums include; how can private healthcare businesses reopen or fully reopen? What does the new customer base look like? How can operators structure or restructure themselves to accommodate 'the new normal' and become robust enough to survive?
In the healthcare space much attention has been given to the COVID-19 catalyst that drove NHS and private healthcare providers to co-operate to great effect. But what happens now as we start to emerge from the first wave of this global event, and NHS reliance on private healthcare resources is reducing?
Reopening of the economy
As at July 2020 in England (although not in other parts of the UK) economic restrictions have been somewhat relaxed, albeit with social distancing still required and extensive health and safety guidance requiring businesses to operate safely. At this point it is unknown when we will reach Level 2, the point at which COVID-19 is no longer in the community and measures such as PPE are no longer mandatory. Equally, it is unknown whether a significant 'second wave' could put the whole of the UK back into full lockdown, or when local measures will be needed to quell isolated outbreaks. What impact is this having on healthcare businesses? Is any financial future-proofing possible?
Private Healthcare Providers
The private hospital providers with massive investment in the supply of healthcare services are most likely to survive the current economic storm – their ability to support the NHS being a lifeline (literally) for their future. Even they, however, will be hit by the reduction in disposable income and job losses/pay reviews that will reduce the private healthcare benefits attaching to many employee benefit schemes.
But the risks are perhaps greater for the small and medium sized providers, and particularly specialist providers including aesthetic clinics, dentists and allied healthcare professionals such as sports therapists? Many will have relied on emergency short-term job and business protection measures (whether via the government, their bank or private arrangements with landlords), but as these start to be withdrawn many will face a cash crunch.
The Aesthetic/Cosmetic Sector
Hamilton Fraser carried out a survey of aesthetic practitioners between 22 and 24 March 2020; of the 1360 responses they received the findings were:
80% of clinics were closed
63% had reduced enquiries
48% identified a risk that they would go out of business.
Respondents recognised the high risk of focusing on private aesthetics alone and the need for a more robust business model with technology, to facilitate virtual consultations and training as essential.
On 20 March 2020 the majority of dental surgeries in England effectively stopped seeing patients, PPE shortages and a plethora of guidance (much conflicting) triggering a reduction in service to triage only (Triple A- Advice, Analgesia and Antibiotics) with referral to Urgent Dental Care Centres and extraction being the only treatment option for many patients.
Re-opening was legally possible on 8 June 2020 but for many not economically viable due to increased infection control measures, including the need for 60 minutes 'fallow time' between certain procedures. The 'new normal' for dental practitioners is even more complex than their pre-lockdown rigorous cross infection control regimes.
Litigation and Regulatory proceedings risks
The state of the national and world economy following COVID-19 is likely to adversely impact on private healthcare professionals in other ways. Recessions are known to increase the average number of fee disputes, complaints and claims. So on top of the significant financial and practical difficulties of re-opening their businesses safely, healthcare businesses may find that more of their time and cash is to be spent on resolving disputes. There could also be an increase in errors leading to clinical negligence claims, because of inevitable factors such as stress, fatigue and increased workload in trying to clear a backlog of treatment, possibly with fewer staff if redundancies have been unavoidable.
New types of claim could emerge, because in many cases there will be a clinical judgment call to make about whether the risks of exposing the patient to the risk of contracting COVID-19 en route to a face-to-face appointment, versus the risk of delaying a firm diagnosis. There could also be disputes about informed consent to go ahead with treatment while the COVID-19 risk remains high. Data protection errors could also generate complaints. Healthcare businesses will need to communicate with existing and potential patients about when and how they can provide services, with the attendant risk of inadvertently using data for the wrong purposes.
Some could also be at risk of fitness to practice proceedings from their regulator. We have heard from numerous sources how much confusion there is about when and how it is lawful to re-open, or to offer healthcare services that are not medically essential or urgent (with aesthetics being a key example). With different rules in force for the four nations of the UK, and the potential for 'local Lockdowns' too, in practice it could be very difficult for healthcare practitioners to keep track. Even though regulatory bodies such as the GMC have indicated that they will take COVID-19 context into account, breaking the relevant lockdown restrictions could result in criminal or regulatory proceedings, especially as COVID-19 is a national public health issue, such that public trust in the healthcare professions must be maintained.
What can be done to sustain the private healthcare industry in a recovering economy?
The way forward is likely to be different for each private healthcare business, but we anticipate that the following themes are likely to be relevant to most:
- A complete review of the services offered by the business and how they are delivered will be crucial. With the future so uncertain, few private healthcare business can expect to continue in exactly the same way as before.
- Many businesses will have introduced measures to offer remote consultations in response to COVID-19, but healthcare providers still need to be more technologically agile. Investment in technology and training can reduce dependence on face-to-face interactions with patients, but also increase future profitability and competitiveness.
- For private healthcare businesses (in whatever role) increasing the scope to provide support to the NHS, and to diversify their services in general, is likely to aid business longevity. It may be that mergers of some businesses will be a sensible way forward.
- Restructuring could be unavoidable for many, but with specialist legal advice and guidance, the process should leave them better able to cope with whatever the future brings. The Government acted quickly at the onset of the crisis to ensure that Small and Medium-sized Enterprises (SMEs) were protected from the initial shock, safeguarding millions of jobs and putting the UK economy in the best position to recover. However, the numbers of distressed businesses are a stark reminder of the challenge that is still in front of us, with tens of thousands of businesses across the UK facing an unsustainable level of debt and taxes deferred.
- To date, the Government has guaranteed a total of c.£43bn of lending to businesses through the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) loan schemes, and deferred more than £30bn in VAT, in addition to other taxes deferred. The financial services sector facilitated this initial lending, providing the infrastructure for businesses to access funding, and provided significant additional assistance to businesses and consumers through repayment holidays.
- The challenge now is to ensure this initial effort does not go to waste and find manageable ways to help businesses repay their additional debt, and, perhaps more importantly, enable businesses to grow again and play their part in the UK’s economic recovery.
- Private healthcare business should also try to forecast how much they may need to pay in relation to fee-disputes, complaints and claims, and ring-fence funds for that purpose. For example, if their medical indemnity arrangements have a self-paid excess or equivalent, then the business needs to be financially prepared to pay that amount if and when claims arise.
- If a private healthcare business is unlucky enough to face several claims at the same time, it would be helpful to have the same legal representation for all of them. Developing a strong working relationship with lawyers with the right range of specialist skills will help ensure you get claims resolution strategies that take into account the cash flow of the business.