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Patients paying too much for private care

101 hospitals face very little local competition

Adrian O'Dowd

Wednesday, 28 August 2013

Patients choosing private healthcare are paying too much due to a lack of competition amongst private hospitals, concludes a report published today by the Competition Commission (CC).

In the CC report’s provisional findings about privately-funded healthcare services, it found 101 hospitals that faced little local competition. Some of these were in clusters of hospitals under the common ownership of one of three major hospital groups – BMI Healthcare, Spire and HCA.

Most (about 80%) of private patients fund their treatment through private medical insurance companies very often paid for by employers, and although the prices charged by operators to insurers are set nationally, the CC said lack of competition was pushing up prices because these insurers had to use the local operator, which led to higher premiums for all patients.

It was also the case that entry into the private health market or expansion was rare due to the high costs of setting up a hospital.

The Office of Fair Trading referred the private market to the CC for investigation in April 2012.

The CC looked at whether the market power of the major hospital groups was matched by the buyer power of the insurance companies.

It concluded that whilst the larger insurers such as AXA PPP and particularly Bupa had some power to challenge the prices, it was not enough to offset the hospital groups’ strong position.

The report also pinpoints incentive schemes, which encourage consultants to choose particular private providers for diagnosis and treatment, and the lack of available information on the performance of hospitals and consultants as further restrictions on competition.

CC chairman Roger Witcomb, who also chaired the private healthcare inquiry group, said: “The lack of competition in the healthcare market at a local level means that most private patients are paying more than they should either for private medical insurance or for self-funded treatment.

“The lack of available and comparable information, often less than is available to NHS patients, also makes informed choices – which could help drive competition – for these patients difficult.

“We’ve also seen the existence of a range of incentives which encourage medical professionals to choose facilities on grounds other than price and quality—and we struggle to believe these can be in the interests of patients.”

BMI Healthcare defended its record and its chief executive Stephen Collier said: “In a number of areas the provisional findings are quite simply wrong, because they are based on flawed analyses of the reality of providing high quality private healthcare.

“We reject absolutely any assertion that BMI Healthcare and its hospitals exercise market power or that we make excess profits at the expense of patients.

“The vast majority of BMI’s 69 facilities, in a UK market with over 500 rival facilities, face very significant local competition from other private hospitals and, increasingly, from the NHS.”

Bupa Health Funding’s managing director Dr Damien Marmion welcomed the report, saying: “Millions of people with health insurance rightly expect high-quality healthcare for an affordable price.

“By tackling the lack of competition that has damaged the sector for too long, the Commission has understood the need for strong action and has put patients first.”

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