SUMMARY OF
THE BRITISH UNITED PROVIDENT ASSOCIATION LTD AND HCA UNITED
KINGDOM LTD: A REPORT ON THE MERGER SITUATION
On 21 November 1989 the Secretary of State
for Trade and Industry asked the MMC (Appendix 1.1) to investigate
and report on the acquisition by The British United Provident
Association Ltd (BUPA) of HCA United Kingdom Ltd (HCA).
BUPA is the largest health insurer in the
United Kingdom, with some 52 per cent of the value of health
insurance premiums in 1988. It also owns 18 private acute
hospitals (excluding those acquired from HCA), some 9 per
cent of the total, and is the second largest private hospital
group in the United Kingdom. HCA with ten hospitals, some
5 per cent of the total, was before the merger the fourth
largest private hospital group in the United Kingdom.
As a result of the merger, BUPA has about
14 per cent of private acute hospitals and private beds.
We do not expect that this increase in market share would
significantly reduce competition or choice, on a national
or local basis.
The main concerns about the merger arise
from the vertical integration between BUPA Insurance and
the expanded activities of BUPA Hospitals. It was, for example,
argued to us that BUPA would divert its subscribers to its
own hospitals, or threaten to do so in order to secure lower
charges from other private hospitals, to the detriment of
its competitors. It was also put to us that the increase
in BUPA's share of the private hospital market would affect
the competitiveness of other health insurers.
BUPA's share of the health insurance market
puts it in a strong negotiating position which enables it
to secure lower charges from private hospitals than other
insurers. Given, however, BUPA's limited share of the private
hospital market, the small increase in that share as a result
of the merger, and its current policy and present intention
of operating its insurance and hospitals businesses on an
arm's length basis, we do not believe that the merger will
significantly reduce competition in either the health insurance
or private hospital markets.
If, however, BUPA were to change its policy
of operating the two businesses on an arm's length basis,
or use its position to the detriment of its competitors,
or increase its share of private hospitals by more than it
currently intends, further examination of the position by
the Director General of Fair Trading might be required.
We have therefore concluded that the merger
may be expected not to operate against the public interest.
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Last Revised: May 1999
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