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Nine private hospitals should be sold to improve competition in the sector, says Competition Commission

Out-Law News | 21 Jan 2014 | 3:19 pm | 2 min. read

The Competition Commission (CC) is encouraging the sale of nine privately-owned hospitals as part of a number of measures to improve competition in the sector.

The watchdog said that it had not yet made a final decision on the nature and existence of competition problems in the sector, which is dominated by three operators: HCA, BMI and Spire. However its provisional report, published in August, found that many private hospitals faced little competition in local areas across the UK and that there were high barriers to entry to the market, leading to higher prices for both insured and self-pay patients.

“We’ve looked hard at how we can meet the challenging task of opening up this market to increased competition,” said Roger Witcomb, head of the CC’s private healthcare inquiry group. “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,” he said.

Among the types of potentially anti-competitive behaviour identified by the regulator are the paying of incentives to consultants who direct patients to a particular private hospital for treatment or tests; and the lack of available information on hospital and consultant performance and fees.

Setting out its provisional remedies (8-page / 126KB PDF) ahead of its final report, which is due to be published in March, the CC recommended that HCI sell London Bridge and Princess Grace hospitals in central London. Rival BMI should sell seven hospitals in London, the Home Counties and the North-West, it said. Buyers of these hospitals would have to be approved by the CC and must have the appropriate financial resources and expertise, it said.

It has  recommended that incentive schemes be prohibited or restricted, and also recommended the collection and publication of information on hospital and consultant performance and fees. In addition, any agreement to operate a private patient unit (PPU) as part of an NHS hospital in an area where there is little competition would have to be approved by the new Competition and Markets Authority (CMA), which will become the UK’s single competition regulator on 1 April.

The proposed remedies are not as tough as those put forward for consultation by the CC in August. Competition expert Jenny Block of Pinsent Masons, the law firm behind Out-Law.com, said that the regulator had “clearly sought to come up with a package to nudge the market in the right direction, but it has also recognised that these are challenging times for the market and encouraging entry may not be straightforward”.

The CC will now consult further on the proposals before publishing its final report.

“Opening up this market to greater competition is not straightforward,” said the CC’s Roger Witcomb. “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 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,” he said.