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CC outlines measures to increase competition in private healthcare

17 January 2014

The Competition Commission (CC) has outlined measures to increase competition in the private healthcare market.

Provisional remedies outlined include the divesture 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.

Also, the Competition and Markets Authority will review any proposal by a private operator to enter into an agreement to operate a private patient unit (PPU) in any NHS hospitals in a local area where it faces little competition.

In addition, the measure will also prohibit or restrict clinician incentive schemes provided by private hospitals to clinicians that encourage patient referrals to their facilities or for particular treatments or tests.

Lastly, the measures will require the collection and publication of information on the performance of private hospitals and individual consultants and the provision of consultant fee information to patients.

The measures are based on findings from its investigation conducted last year, which found that many private hospitals face little competition in local areas across the UK and that there were high barriers to entry. 

According to the CC, 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.

CC chairman Roger Witcomb said: ‘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.’

In addition, he added that removing the practices and barriers which prevent new operators getting a foothold in a particular area and helping patients in their choices will ‘play a greater role in driving competition on both quality and price’.

‘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’, explained Witcomb.

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