A recent article from the UK’s Journal of the Royal Society of Medicine makes fascinating reading on he big picture of where private healthcare may be heading.  De facto privatization or a renewed role for the EU? Paying for Europe's healthcare infrastructure in a recession starts by recognising that the recession and scarcity of capital coupled to the sheer complexity of hospitals has made banks very wary.

It suggests that capital expenditure looks likely to enter famine on both the public sector and the commercial capital markets sides. It points out that in the UK the annual value of signed contracts for health PFI projects fell from a peak of over £3 billion in 2006 to £520 million in 2008.

The article reckons that the EU's Structural Funds may offer a way out for some new member states with facilities that are unfit for purpose, but competition will rise and it is not clear that health will get much more than its traditional 1% share. We hear it will make a big difference to medtech suppliers in Eastern Europe but little further west.

It then ties healthcare provision into pensions, pointing out that “the fiscal burden of the current crisis to developed economies – only equalled in wartime – is in fact worth only about 11% of the ageing-related costs of pensions and healthcare in coming decades. Governments have little choice but to endeavour to pass on their pension commitments to the private sector, which will have to create assets to match the liabilities.” Healthcare capital investment, providing a relatively stable if not high return, could well be part of the mix of these assets.

The economic crisis, and need for countries where healthcare infrastructure is publicly funded to reign in expenditure, may reinforce moves towards an increased role for the private sector.  It concludes that banks may eventually see healthcare as a form of stable and safe – albeit not high-return – investment, driving new and innovative forms of public–private partnership. There are some emerging and stable models in Europe along these lines - the Alzira model and what Finnish private equity group Corona is doing with Coxa.  Elsewhere, we see huge promise in France, outsourcing and patient choice in Sweden and a privatisation boom eventually looks likely in Germany. But, generally, European governments have yet to demonstrate a willingness to really develop a strategic relationship with the private sector. We cover all this in our latest issue of the newsletter which looks indepth at private public partnerships.