Insider Media Limited

For private equity investors, primary care services remain the final healthcare frontier - a market historically largely protected by law, custom and practice. However, with the new Health and Social Care Bill, change now appears inevitable.

GPs are being placed (whether they like it or not) at the heart of the coalition government’s change agenda. Through GP consortia, which will be responsible for commissioning services on behalf of patients, GPs will be made financially responsible for clinical decisions. There is no doubt that in itself, this ‘revolution’ - which devolves commissioning from PCTs - is a huge challenge, let alone when placed in the context of the £20bn efficiency savings the NHS has been tasked to make by 2014-15.

The principles behind the legislation are arguably sound: greater engagement of GPs in decision making, improved patient choice through plurality of provision, better outcomes through a focus on long-term care pathways and commissioning of services. Whether GPs have the appetite, inclination or skill-sets to deliver on the reforms remains a healthy topic for debate.

The ability of the government to drive through reform by its 2013 deadline in a controlled way is coming under intense scrutiny. With the health select committee proposing a series of changes to the government’s proposals this week, we are in a crucial period following which it will become clear if consensus can be rebuilt and politics and policy re-aligned.

Regardless of timing, the change agenda will create significant opportunities as clinical services transition from secondary to primary care settings and NHS outsourcing increases in an attempt to drive out cost. The market is ripe for innovative new entrants and/or entrepreneurial GP services which are prepared to challenge the established status quo and deliver existing services in new, more efficient ways.

In 2004, the introduction of the general medical services contract and the concept of alternative provider medical services broke the GP’s monopoly on primary medical service provision both in theory and regulation. As most GPs opted out of out-of-hours provision, when the surgery door closed, someone else needed to be responsible for patient needs. Not surprisingly, private providers stepped forward to fill the service gap, although to date they have been cautious in extending to daytime surgery led services.

The proposed reforms create a huge opportunity. Both corporate and private equity providers are poised, ready to step into relatively uncharted investment territory. However, there remain two key blocks to significant investment in GP services: the inability to buy/sell goodwill in GP practices and certain issues surrounding the NHS pension scheme that make investment difficult and cost prohibitive. The government is aware of both of these issues, but as yet has not legislated to remove impediments.

It seems that we are in for an interesting decade of change across the health service. Although ISIS has previously successfully invested in primary care through both ScriptSwitch and Williams Medical Supplies, we remain interested in supporting compelling propositions. Niche service or technology-led businesses delivering new ways of working or cost effective clinical outcomes should provide a rich seam of investment. Although there remains uncertainty over the pace and extent of change, with uncertainty comes opportunity and ISIS remain long-term investors in the health market.

Matt Caffrey is investment director and national lead on healthcare at ISIS Equity Partners. He won the Young Dealmaker of the Year category at the Dealmakers Awards 2010