LONDON, Feb 11 (Reuters) - A new appeals panel could open up the UK's healthcare market to billions of pounds of new contracts, making companies in the sector an attractive buy for investors willing to commit cash for three to five years.
Industry figures say the Co-operation and Competition Panel for NHS Services will be a nascent regulator for business farmed out by Britain's state health authority, the National Health Service (NHS), enforcing competition practices and offering up potentially 10 billion pounds ($14.41 billion) worth of contracts to private tender.
"Our view generally is that the potential market is so significant, that even marginal involvement by some of the smaller UK players could have a meaningful impact on these businesses' bottom lines," said analyst Chris Glasper at Brewin Dolphin.
He picked out Care UK, a provider of health and social care services, managed staffing services group Nestor and GP surgery owner Assura as companies that could particularly benefit.
The emerging market, which covers the private provision of services such as doctor care, surgery and hospital laundry, could also benefit companies such as decontamination specialist Synergy and care home operator Southern Cross.
Andrew Taylor, director of the panel, said the number of contracts being made available was increasing.
"Clearly the direction of travel is one in which there are more opportunities for all sorts of people to tender to provide services to the NHS," he said.
Already millions of pounds of contracts have been placed up for grabs, in a market which only started a few years ago.
The NHS has seen spending under the patient choice programme rise from 2.8 million pounds a month in January 2008 to 9.5 million pounds by November 2008, and it expects this to increase steadily.
David Worskett, Director of the NHS Partners Network, a group representing the interests of independent sector providers to the NHS, said: "This is clearly a little bit more than just an appeals board, it begins to look more like an early-stage market regulator from a competition and economic point of view."
He said that it would be critical to the emerging market for services because private companies must compete with former NHS departments.
"We need to be fairly sure that the vestiges of what you might call favouritism towards in-house providers doesn't result in a skewing of the procurement processes," he said.
He pointed out that generous public sector pensions could get in the way of the free flow of staff to private sector companies, and added that highly skilled consultants would need to work for competing organisations at the same time.
"It's the competition and co-operation panel, healthcare is not quite like other markets there is a need for proper co-operation in a number of ways," he said.
The panel will report its findings to the relevant Strategic Health Authority, a body which manages regional NHS services, MONITOR, the independent regulator of locally run hospitals, or the Department of Health.
Mike Parish, Chief Executive of Care UK, predicted that there would be several billion pounds of contracts up for grabs over the next few years as a result of the emerging market.
"I expect over the next three to five years 10 billion pounds of activity to be available to competition," he said.
He added that he expected a number of companies to launch IPOs in the sector.
PANEL NEEDS "REAL TEETH"
Brewin Dolphin's Glasper, however, remains unconvinced however that the panel will have any "real teeth".
"Experience of dealing with the NHS so far has generally ended in disappointment ... and new contracts in Primary Care are generally being awarded 'in house' or to third sector providers," he said.
"It remains to be seen how far private sector providers can gain a meaningful foothold in the short term and whether the principles of Any Willing Provider and Patient Choice have a meaningful impact on the structure of the NHS."
However, Taylor responded to concerns over the new panel's effectiveness by pointing out its rulings would be taken to decision-makers and made public.
"It's ... worth bearing in mind that our recommendations will be public, we will publish our report and so for decision-makers in receipt of our recommendations they'll be wanting to take that into account.
Glasper said the key remained in the delivery of contracts, managing them appropriately and successfully extending them when they come up for renewal.
"We do see the potential for the likes of Care UK, but evidence of sustained success will be key," he said. ($1=.6941 Pound) (Reporting by Ben Deighton; Editing by Jon Loades-Carter)