Competition And Consternation In The Private Healthcare Market

Author:and Agnieszka Phillips
Profession:Bircham Dyson Bell LLP

The end of 2011 was marked for the private healthcare market by the Office of Fair Trading's announcement of its provisional decision to refer the sector to the Competition Commission (CC) for investigation, and by public signs of tension between Bupa and BMI, the biggest private medical insurer and the largest private hospital chain respectively. In this article Agnieszka Phillips summarises the latest developments.

Referral of the private healthcare market to the Competition Commission

On 8 December 2011 the OFT published its report on the £5 billion private healthcare (PH) market. It concluded that competition may not be as strong as it could be and so it has provisionally decided to refer the sector to the Competition Commission for investigation.

The year long investigation found a number of features that, "individually or in combination, prevent, restrict or distort competition" in the market. The features include:

a shortage of accessible, standardised and comparable information provided to patients, GPs and private medical insurance providers in relation to the quality of PH facilities and consultants; a lack of transparency over the full costs of PH services, leading to unexpected shortfalls that need to be funded by patients personally; pockets of particularly high concentration in some areas (e.g. where a PH provider owns the only local hospital); factors that create significant barriers to entry by new entrants (e.g. incentives given to consultants for referrals, and penalties imposed by a PH provider such as price rises should an insurer recognise a new entrant). Whilst some market players welcome the prospect of the investigation by the Competition Commission others are conscious that responding to lengthy information requests and giving evidence will divert management and legal resources.

Prior to the publication of the report the OFT engaged with industry participants and bodies in order to see whether its concerns about the lack of comparable information and transparency could be resolved through agreed actions within the timescale of the market study. However, the OFT concluded that "whilst there was a good deal of consensus amongst participants across roundtables about the benefit of greater information for patients and GPs, there was a clear diversity of views between participants in regard to how greater comparable information on quality could be developed and on how fee visibility could be improved."

The OFT is...

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