Revenues of independent sector mental health hospitals in the UK rose to a record £1 billion in 2008 according to Mental Health and Specialist Care Services UK Market Report 2009/10, the annual report on the sector from health care market intelligence specialists Laing & Buisson.

Meanwhile, independent sector bed capacity reached just over 9,000 places by mid-2009, and now makes up 25% of bed capacity across the public and independent sectors combined. An estimated 85% of independent mental health hospital revenues (£860 million) are paid by the NHS, making it the largest single recipient of NHS spending on independently provided healthcare services.

Editor of the report William Laing said: 'The underlying reason why the NHS pays for the independent sector to provide such a high proportion of mental health hospital services, rather than providing them in-house, is because independent hospitals are better placed to serve groups of patients with specialised needs. 'Demand for these patient groups is typically regional or even national and it makes sense to pass the risk of running hospitals of an economic scale - which need to attract 'out of area' patients - to the independent sector. NHS mental health trusts, for their part, have focused their investment on new community based services (such as assertive outreach and crisis resolution) and relatively undifferentiated in-patient services to meet local needs'.

Independent sector expansion, however, is projected to level off in the medium term in the aftermath of the global credit crisis and the ensuing recession. One reason is the continuing shortage of capital for new developments on acceptable terms to developers / investors, who continue to be cautious about taking on new commitments in times of uncertainty. This is resulting in a slowdown in new capacity in the pipeline as projects started before the credit crunch come on stream. A second reason for slowdown is the expected downturn in NHS spending from 2011/12. It is unlikely that the independent sector will emerge unscathed from a general tightening of budgets, though the report does point out that new opportunities may also be created.