What’s in a name? Why the “Out-of-hospital” definition gap stalls investment

If it looks and feels like a hospital...it might actually be a polyclinic. 

In the current landscape of healthcare in England, “Out-of-Hospital” care is one of the industry’s favourite catchphrases and potentially one of its most significant structural questions. Policymakers, commissioners and operators across the market agree on the objective: move care away from overstretched acute hospitals and into the community. Yet, as high level policy starts to be tested and translated into real-world implementation, the risk of a fundamental “definition gap” could be stalling the process, especially at the critical and evermore complex interface between the NHS and the independent sector. 

It is becoming clear that there is no single, one-size-fits-all definition of ‘hospitals’, or of ‘community’, in this context. We know what we want (more “community” care, less “hospital” care) but without consistent interpretation of these terms, designing an effective strategy for implementation and measuring meaningful success against the objectives become impossible tasks. 

The strategic cost of ambiguity: economic pressures and capital inertia 

Against a background of economic and structural volatility in the sector, the “definition gap” creates three primary risks: 

• Contractual fragility plus rising costs equals a bumpy road to implementation: Providers are facing unprecedented operational pressures, from soaring utility costs to keeping up with regulatory and legislative changes and the hike in Employers’ National Insurance. When these costs meet a “one-size-fits-all” NHS tariff that doesn’t recognise the unique overheads of specialised community hubs, the financial viability of the “left shift” is pushed to breaking point. For independent players in the market, profit warnings across the sector underscore that the current model is unsustainable without properly designed, bespoke contractual forms. We will have to wait another year for the elusive single neighbourhood provider and multi-neighbourhood provider contract templates that may provide some much-needed structure.  
• Regulatory and commissioning misalignment: Oversight bodies often apply “acute” standards to community settings and many primary care requirements fail to capture the complexity of specialised diagnostics, orthopaedics or ophthalmology. This misalignment leads to inconsistent decision-making, such as the sudden withdrawal of funding for critical community services like Autism and ADHD assessments. 
• The growth plateau: While PMI demand remains resilient and the self-pay market shows signs of growth, the broader activity in the independent health market has slowed, in particular when it comes to the delivery of NHS services by independent operators. Institutional investors are hesitant to commit long-term capital to neighbourhood health when the rules of the game can be rewritten by an ICB restructuring or changing their approach to local activity management. 

Bridging the gap 

To turn the “Out-of-Hospital” vision into a bankable reality, we must move beyond rhetoric and into the realm of regulatory and contractual frameworks. From a legal and policy perspective, the solution lies in creating a recognised third category of healthcare infrastructure. This involves: 

• Bespoke contractual archetypes: Developing neighbourhood hub contracts that allow for multi-year stability and fair-value pricing that accounts for current inflationary and legislative cost pressures.
• Regulatory parity: Working with regulators to ensure that polyclinics are judged on outcomes relevant to their specific setting, facilitating the safe migration of services out of acute hospitals.
• Integrated governance: Establishing clear legal pathways for data sharing and patient transfer that treat independent providers and operators as equal, integrated partners in the patient journey. 

The path forward

The definition gap is the single greatest obstacle to the shift of care. We don’t just need more community beds; we need a formalised sector identity. By defining the Out-of-Hospital sector through robust legal strategic frameworks, we create the certainty required to withstand economic headwinds and unlock meaningful investment. Only then can these neighbourhood hubs stop being alternative providers and start being the cornerstone of a sustainable, modern NHS. 

Ready, willing and able

As discussed in this recent piece by Sarah Skuse, our Head of Independent Health & Care Real Estate, the independent health sector is ready, willing and able to support the delivery of this key strand of the NHS 10 Year Health Plan, but finds itself hamstrung when it comes to making significant changes. That is not to say there is no activity happening – far from it. Specialist community clinics, diagnostics hubs, virtual wards and the variety of other health services being delivered in people’s homes are doing more than ever before and becoming the engine room for implementing the NHS 10 Year Health Plan. Add in the 250 neighbourhood health centres due to open in the next 10 years and the concept of health being delivered ‘not in a hospital’ starts to feel tangible even if it remains a challenge to pin down singular definitions. 

However, when considered through the lens of the independent operators, investors and developers that are required to deliver these facilities and services, such innovative hubs face “identity friction” in terms of where they sit in the health system. This isn’t just a semantic issue; it is a strategic barrier. That is partly due to confidence. Confidence in exactly what the ask is and confidence in the investment they will need to make if they pivot down this route, particularly where their revenue streams will be relying in part on delivering NHS services.

Any kind of meaningful ‘shift’ of care away from the existing model will necessarily, at some point, have to involve private investment and development. To that end, diversification is going to be a major factor in attracting the kind of investment needed to shift care to a new model. A single facility offering limited diagnostics or treatment in one specialism for one kind of payor is a risky investment for most in this market – it might only take the local ICB to change its position on how it uses activity management plans to have a major impact on the viability of that specialist clinic. But a substantial polyclinic in an accessible location offering end to end diagnostics and treatment in multiple specialities servicing both NHS and private patients offers a much safer bet against changing political winds, stretched local commissioning budgets and trends in the private pay market. Just don’t call it a hospital.

To discuss any of the themes raised in this article in more detail, please reach out to Letitia Winterflood-Blood.