CC sets out changes for private healthcare
16 Jan 2014
The Competition Commission (CC) has outlined its proposed measures to increase competition in the private healthcare market.
The measures are based on the CC’s provisional report in its private healthcare investigation, which was published in August last year and found that many private hospitals face little competition in local areas across the UK and that there were high barriers to entry. This led to higher prices for insured patients by those private hospital operators with market power in negotiations with private medical insurers (PMIs) namely HCA, BMI and Spire, and for self-pay patients in many local areas.
The CC also pinpointed incentive schemes, which encourage clinicians including consultants to refer their patients for treatment or tests to particular providers and a lack of available information on the performance of hospitals and consultants and on consultant fees as further competition problems.
Today’s provisional decision on remedies follows further work by the CC to develop the initial list of measures it also published in August. The CC will now consult further on these measures (as well as continuing to assess responses to the provisional decision itself) before it publishes its final report at the end of March. The CC has not, at this stage, made a final decision regarding the existence and form of any competition problems.
The provisional decision on remedies 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 (see Notes for editors) 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.
CC Chairman and Chairman of the Private Healthcare Inquiry Group, Roger Witcomb said:
‘We’ve looked hard at how we can meet the challenging task of opening up this market to increased competition. We’re now proposing those measures which we believe will offer practical and effective ways of improving competition and ensuring private patients get a better deal.
‘Requiring operators to sell hospitals is a big step and we have focused on those areas where a sale will be effective in increasing competition—where a single operator owns a cluster of hospitals which face little rivalry.
‘As well as these measures, we will look to remove ways in which hospital operators can reinforce their position and close the door on potential competition. So we want to prevent incentive schemes that encourage patient referrals to particular hospitals. We will also look to ensure that the option to partner with a NHS PPU is open to potential new entrants in areas which need greater choice.
‘We will also provide for greater information on the performance of hospital operators and consultants and for consultants on price as well to allow patients to make informed choices when deciding which hospital and consultant to choose for their treatment.
‘Opening up this market to greater competition is not straightforward. Neither patients nor GPs have enough information, either on price or quality, to make informed decisions, and high costs and demand stagnation mean that new competing facilities are not going to spring up easily. In some areas, sales of hospitals to other operators will be effective in increasing rivalry but in areas with, for example, a single private hospital, a sale would just transfer market power from one operator to another.
‘What we can also do is remove the practices and barriers which can prevent a new operator getting a foothold in a particular area and help patient choice play a much greater role in driving competition on both quality and price.’
The majority (about 80 per cent) of private patients fund their treatment through PMIs, very often paid for by employers.
The provisional decision on remedies summary is available on the private healthcare market home page along with other information relating to the investigation. The full provisional decision on remedies will be published shortly. The CC is required to publish its final report by 3 April 2014—the inquiry timetable (PDF, 29 Kb) sets out the remaining stages for the investigation.
Any interested party is invited to respond to the provisional decision on remedies in writing by 6 February 2014.
To submit evidence, please email email@example.com or write to:
Private healthcare market investigation
Notes for editors
1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries. In April, the CC will join with the competition and certain consumer functions of the Office of Fair Trading (OFT) to form the new Competition and Markets Authority.
2. The members of the private healthcare market investigation group are: Roger Witcomb (Chairman of the Group and CC Chairman), Jayne Almond, Tony Morris, Jeremy Peat, and Jonathan Whiticar.
3. The OFT referred the market to the CC for investigation in April 2012. Under the Enterprise Act 2002, the OFT can make a market investigation reference to the CC if it has reasonable grounds for suspecting that competition for the supply or acquisition of certain goods is not working effectively.
4. In its inquiry, the CC is required to decide whether ‘any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom’. If so, then there is an adverse effect on competition and the CC will also consider whether this is resulting in a detrimental effect on customers such as higher prices, lower quality or less choice of goods or services. The CC will then decide whether the CC should introduce remedies to tackle the adverse effect on competition or detrimental effect on customers or whether the CC should recommend action be taken by other bodies to remedy the adverse effects on competition, and if so, what actions or remedies should be taken. If the CC finds that there is no adverse effect on competition, the question of remedies will not arise.
5. The Enterprise Act 2002 requires the CC to consult the main parties on its proposed decisions and it will also publish notice of its provisional findings on the CC website as required by its rules. Full details on the CC’s guidelines for market investigation references (PDF, 2.7 Mb) are available on the CC website.
6. Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 020 7271 0242.