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Back in April 2012, the Office of Fair Trading (OFT) announced its decision to refer the market for privately funded healthcare services in the UK to the Competition Commission for further investigation.

This week the Competition Commission outlined its proposed measures to increase competition in the private healthcare market.

What were the OFT concerned about?

The OFT held the view that the private healthcare market could work better for patients, and that there were reasonable grounds for suspecting that there are features of the private healthcare market that prevent, restrict or distort competition.

These are the areas that raised concerns with the OFT:

  • A lack of easily comparable information available to patients and their GPs on the quality and costs of private healthcare services. This may mean that competition between private healthcare providers and between consultants is not as effective as it could be. In addition, the full costs of treatment may not always be transparent for private patients.

  • There are only a limited number of significant private healthcare providers and larger health insurance providers at a national level. There are pockets of particularly high concentration in some local areas where private patients have a limited choice of hospital. Given the desire for patients to be treated locally, this may mean that insurance providers will generally rely on these larger healthcare providers to provide this access to treatment for their policyholders.

  • A number of the features of the private healthcare market combine to create significant barriers to new competitors entering the market and being able to offer private patients greater choice. For example, some larger private healthcare providers can impose price rises or set other conditions if an insurer proposes to recognise a new entrant on its network. There also appear to be certain incentives given by private healthcare providers to consultants, such as loyalty payments for treating private patients at a particular facility, which could raise those barriers further.

What has the Competition Commission proposed?

In today’s announcement, the Competition Commission proposes the following measures:

  • Divestiture of nine private hospitals—HCA should sell two hospitals in central London (London Bridge and Princess Grace) and BMI should sell seven hospitals in Greater/Outer London, Home Counties and the North-West of England.

  • Buyers will need to get CC approval and to have the appropriate financial resources and expertise;

  • The Competition and Markets Authority (a newly formed organisation) will review any proposal by a private operator to enter into an agreement to operate a private patient unit (PPU) in an NHS hospitals in a local area where it faces little competition;

  • Prohibition on or restriction of clinician incentive schemes provided by private hospitals to clinicians that encourage patient referrals to their facilities or for particular treatments or tests; and

  • Requiring the collection and publication of information on the performance of private hospitals and individual consultants and the provision of consultant fee information to patients.

So HCA is faced with the sale of the London Bridge Hospital and Princess Grace Hospital. BMI may have to sell hospitals at Chelsfield Park in Orpington, and the Highfield in Rochdale, Greater Manchester. The plans would also mean disposing of: either Bishops Wood or Clementine Churchill hospitals in North- West London; Cavell or Kings Oak in Enfield, North London; Shelburne or Chiltern in Buckinghamshire; Sloane or Shirley Oaks in South London; and Saxon Clinic in Milton Keynes or Three Shires in Northampton.

What is the industry’s response?

Here is how the industry is responding to this announcement:

BMI Healthcare

Stephen Collier, of BMI, accused the commission of failing to grasp how the market for private healthcare worked. He said: "It is a fact that BMI Healthcare's shareholders have taken nothing out of the business they bought in 2006, instead reinvesting every pound earned back into our hospital operating business.

"It is therefore bizarre for the Competition Commission to claim that we are making excess profits and need to sell seven hospitals, a remedy that will have no benefit for patients because there is already sufficient competition and it won't lower costs."

HCA

Mike Neeb, chief executive and president of HCA International, said the commission was "threatening unjustified and unfair remedies". He said: "The Competition Commission's provisional recommendations are plainly wrong. The CC's own report acknowledges there are nearly 50 competitors in Greater London. Our ownership of these hospitals encourages competition and drives a higher standard of care among hospitals in the UK."

Nuffield

Nuffield Health Chief Executive, David Mobbs said: “Today’s report should act as a wake-up call for the private healthcare sector. The over-riding need for some providers to make huge profits at the expense of UK patients is clearly evident throughout the report. As the Competition Commission has recognised, as much as £190 million is being spent unnecessarily every year due to the market dominance of HCA, Spire and BMI allowing them to drive up prices.”

BUPA

Dr Damien Marmion, managing director of Bupa Health Funding, said: "This report is a decisive step forward for customers and patients. The commission is right to address the dominance of some hospital groups in areas like London.”

What is the media view?

The Guardian

Competition Commission orders two healthcare groups to sell nine hospitals

“Investigation concluded that prices were kept artificially high by dominance of largest private groups”

Financial Times

Regulator forces sale of nine UK private hospitals

Vernon Baxter, editor of Health Investor magazine: “The main winners are the insurers, who will hope to reduce fee rates off the back of this…BMI and HCA’s rivals will be keen to pick up these properties, but the proposed solution looks like a redistribution of assets, rather than a panacea for private healthcare.”

Daily Telegraph

Watchdog wants to force sale of private hospitals

“Competition Commission plans to reduce a few companies' dominance of the private health sector could see nine hospitals been forcibly sold under the watchdog's watered-down but bitterly contested plans to shake up the sector. It scales back an initial proposal that up to 20 sites should be sold but was still rejected as "unfair" and "bizarre" by the two leading private healthcare providers affected, raising the prospect of a potential legal battle in the future.”

Evening Standard

Watchdog orders sell-off of London private hospitals

“The ruling will also have implications for NHS hospitals that have private wings, such as UCLH and St Mary’s…. But the CC’s decision is a significant retreat from its original determination, made in August, that BMI, HCA and Spire Healthcare sell off up to 20 hospitals. It said the three firms made “excess profits of between £519 million and £579 million” between 2009 and 2011 and found patients were paying about £200 million a year too much for private medical insurance.”

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About the author

Keith Pollard is Executive chairman of LaingBuisson International Limited, an online publisher in the healthcare sector that operates market-leading web portals such as Private Healthcare UK and HarleyStreet.com. LaingBuisson International Limited is also active in the online medical travel sector through Treatment Abroad, International Medical Travel Journal and DoctorInternet, the Arabic medical tourism portal. View www.keithpollard.com for my full profile.


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