The NHS continues to grapple with burgeoning backlogs for elective procedures, a longstanding issue compounded by the disruptive impact of the COVID-19 pandemic. The backlog, which surged from a pre-COVID level of 4.2 million to a staggering 7.8 million by September 2023, continues to escalate.
Clinical insourcing presents a solution that effectively utilises underused NHS infrastructure, generally outside of standard working hours. External private operators provide complete clinical teams and seamlessly integrate with NHS systems, enabling the tackling of backlogs without disrupting day-to-day NHS operations. This solution is generally delivered below NHS tariffs, usually offering superior value for money compared to outsourcing. Moreover, recruiting clinicians is comparatively easier than for internal NHS waiting list initiatives.
Clinical insourcing has long been dominated by two major players, Medinet and 18 Week Support, both of whom have recently taken on private equity investment to solidify their positions in the market. Medinet secured investment from Fremman Capital (resulting in an exit for Volpi Capital), while 18 Week Support received backing from Summit Partners.
As competition intensifies, the growth trajectories of these key players hinge significantly on M&A to expand their operations and diversify service offerings. Medinet's acquisition of Remedy Healthcare Solutions exemplifies this strategy, bolstering its market presence and broadening its service portfolio, which now includes staffed modular solutions.
Beyond these industry leaders, a group of smaller operators such as HBS, The Endoscopy Group and KPI Health have differentiated themselves in the market. These businesses distinguish themselves by offering specialised clinical services or innovative technological solutions. We expect to see M&A activity and private equity investments among this second tier of insourcing companies as they strive to sustain growth and create competitive differentiators.
Furthermore, operators from adjacent markets are eyeing the thriving insourcing sector for expansion opportunities, with examples including PHL Group's acquisition of Synaptik and Totally's acquisition of Pioneer Healthcare.
Given the market's momentum and the persistent growth of NHS backlogs, the clinical insourcing sector is poised for continued activity and expansion in the foreseeable future.