Changes to the NHS are creating lots of commercial opportunities. But grabbing these can be difficult for small firms. In the third of her articles marking the 60th anniversary of the NHS, healthcare expert Alexandra Wyke talks to the founders of three small businesses about their experiences

With so much money being spent on and by the NHS, and so much upheaval in the system, it's no surprise that entrepeneurs have been drawn to this potentially lucrative market. Many have seized the opportunity to launch companies specifically to take advantage of the opportunities opening up. And the government has actively encouraged their creation. But a turbulent market can operate against, as well as for, small businesses. In addition, providing services to a bureaucratic, risk-averse and highly-politicised organisation such as the NHS can prove difficult.

The three case studies that follow illustrate that small firms need to offer more than being good at what they do. Small firms also have to know the right people, understand what is politically feasible and be prepared to have everything they have built undone at a stroke by a change in health policy. There are opportunities aplenty, but they are not without risk.

1. Minervation

Small but perfectly informed
Formed in 2002 as an Oxford University spin-off, Minervation occupies a niche as a Web content designer for organisations interested in healthcare. It is unusual in that its work emphasises evidence-based medicine (EBM), a methodology that tries to marry the preferences of patients and doctors with the latest scientific evidence. The NHS is a champion of EBM, which (in theory) enables doctors to discriminate between good and bad medicine, and helps governments and practitioners make better, more-informed decisions. Minervation, still based in the academic heartland of Oxford, has made its name by capitalising on EBM's popularity.

Both the founders, André Tomlin and Douglas Badenoch, trained as information scientists. Tomlin says they just happened to find themselves in the right place at the right time. During the mid 1990s, the pair were working for one of the hubs in the new network of Centres for Evidence-Based Health Care. Their activities brought them into close contact with Sir Muir Gray, who is currently chief knowledge officer at the NHS and remains a mentor to the Minervation team.

Today, a third of Minervation's annual revenue of £500,000 comes either from work carried out under tender for the NHS, or from the supervision of one of Tomlin's creations, the NHS National Electronic Library for Mental Health.

Tomlin is now keen to exploit his company's track record of in-house software developments for the NHS. One product in development is Phaedrus, an evidence-based content management system that supports literature searching, sifting and critical appraisal. Minervation plans to license out these developments to supplement the firm's current revenue stream. Tomlin wants to double the firm's revenue, but says it will take Minervation five years to achieve this growth.

2. PAERS

Close to a records deal?
South-east London GP Dr Brian Fisher is a man with a vision. His problem is getting the NHS to share it. In 2003, relying on seed capital from Lewisham Primary Care Trust, he founded PAERS (Patient Access to their Electronic Records System) with two other tech-savvy doctors, now employed full-time by the company.

PAERS develops the IT to enable patients to access and—more importantly—easily understand what doctors write and say about them. By deploying software similar to Babel Fish (Yahoo's online language translator), PAERS has been able to produce a number of useful prototype online systems that allow patients to view their medical records—ideally via a touch-screen kiosk (one of which sits in Fisher's practice). Record security from the kiosk is based on thumbprint recognition of each patient.

A more popular approach is online. Authenticated by photo-ID, patients can see their full GP record, complete with explanations and interpretations,  via a Web-browser anywhere in the world, or on their mobile. The technology has won the support of EMIS, the major IT supplier to GPs, which has given its support to help develop the product and provide access to GPs.

Fisher hopes that PAERS may prove an asset to the NHS, but the prospects aren't great. Dr Fisher believes that patients should be entitled to see their full record, easily, at the touch of a button. But the Department of Health (DoH) has other ideas. Says Fisher: "Despite having lots of meetings and even though Connecting for Health [the agency in charge of modernising record-keeping in the NHS] knows what we are doing, the government has chosen to develop its own Summary Care Record, which contains only a synopsis of each patient's records in the GPs' database."

Without the support of the NHS, Fisher is stumped as to where he can source revenue for his patient record system. "It is unclear," he says, "who is prepared to pay for record access."

To date, PAERS has survived through the sale of peripheral products, such as an arrivals kiosk used by patients at reception to alert the practice that they have arrived for their appointment. Undeterred, Fisher believes that the disadvantages of the Summary Care Record are such that his system can at least co-exist with it. For example, confidentiality worries still loom over the government scheme, which requires data to be stored on a central database, while Fisher's system stores data locally.

3. Rising Curve

Taking LIFT to a new level
When it was unveiled in February 2001, the NHS Local Improvement Finance Trust (LIFT) seemed like a good idea. The initiative, financially backed by the DoH, encourages the formation of partnerships between Primary Care Trusts (PCTs) and the private sector. It aims to encourage new investment in primary care and community-based facilities to iron out inequalities in the national NHS infrastructure. Under the arrangement, PCTs invite private-sector suppliers into a joint relationship, known as a LIFT company. The company has a lifespan of 20-25 years to build, own and maintain properties that are then leased to NHS healthcare providers.

But building relationships between the public and private sector is notoriously difficult. Rising Curve, a consultancy formed in November 2007, aims to help. It offers financial advice to both public and private sector clients involved in the LIFT programme.

According to co-founder Glenn Richer, there is often mutual suspicion on both sides. "PCTs have been undergoing a rapid process of change and are shell-shocked by the upheavals," he says. "PCTs seem unable to understand the private sector. They distrust it, and fear being ripped off." 

If PCTs want to be sure of value for money, contenders for NHS cash want to be sure of getting paid within a reasonable timeframe. Small firms often find that the public sector can be worryingly bureaucratic, and that schedules slip constantly. When delays run to years, the consequences for a private company can be devastating.

Richer, who played a significant role in the creation of LIFT companies in a previous job with DoH body Partnerships for Health, is confident of success, and hopes to achieve annual revenues of £1m within four years. With each LIFT scheme valued on average between £5m to £20m, there appears to be room for consultancy that can ease the burden of risk for partners unused to working together. Richer's only risk is betting on a scheme whose existence depends on consistent government policy.

Alexandra Wyke, a former business and science correspondent for the Economist, is the founder of PatientView, an independent research and publishing organisation working closely with patients and health and social campaigning groups worldwide. Her book 21st Century Miracle Medicine was published by Plenum in 1997.