CMA’s private healthcare provisional decision on remedies
The CMA has provisionally found that likely changes in London’s private healthcare market mean that extra remedies would not be proportionate.
In April 2012, the Competition Commission, a predecessor body of the Competition and Markets Authority (CMA), started a market investigation into private healthcare which reported in April 2014, immediately after the establishment of the CMA. The report concluded that certain features of the markets for privately-funded healthcare services were leading to an adverse effect on competition (AEC). A number of remedies introduced in this report have subsequently been implemented. However in the London market, the CMA required HCA International Limited, the largest private hospital operator in central London, to sell one or two of its hospitals.
HCA identified errors in the CMA’s insured pricing analysis and appealed to the Competition Appeal Tribunal (CAT), which in January 2015 set aside part of the CMA’s findings and sent the case back to the CMA to reconsider.
In its provisional findings report published in November 2015, the CMA found an AEC due to HCA facing weak competitive constraints which led to it charging higher prices to private medical insurers than would be expected in a well-functioning market. This was in addition to the AEC for patients who self-pay in central London, which the CMA identified in its original report.
After consulting on 6 possible remedies (outlined in the CMA’s Notice of Provisional Remedies), including the divestment of one or more hospitals by HCA, the CMA has now reached the provisional conclusion that none of these additional remedies would be both effective and proportionate.
Roger Witcomb, Chairman of the Private Healthcare Market Remittal Group, said:
In the course of our reconsideration of the central London market we have received a substantial number of submissions and heard a great deal of new evidence.
In our final report in the original investigation and again in our provisional findings on the remittal, we identified that customers of privately-funded healthcare in central London were paying too much, largely because of HCA’s strong market position. In our original investigation, we sought to address that problem by requiring HCA to sell one or two of its central London hospitals. We still believe the market requires more competition, but the new information we have received in the course of the remittal means that we now believe that divestment is no longer a proportionate remedy.
This new information has included evidence of probable entry into the central London market, which we consider will provide a competitive constraint on HCA in this market within the next 4-6 years. This means that benefits to consumers of a divestment would be short-lived and not large enough to outweigh the cost of divestment, and we have found no other remedy which is both effective and proportionate.
This was a finely balanced decision, and the group was not unanimous. We will of course consider responses to this provisional decision before making a final decision on remedies.
The CMA has already brought in a number of changes in the private healthcare market as a result of the initial investigation, including:
- The appointment of the Private Healthcare Information Network to provide independent information for private patients on healthcare performance as required by the CMA’s final report. The website will carry information on, among other things, the performance of private hospitals.
- A crackdown on benefits and incentive schemes provided to referring clinicians by private hospital operators.
- The ability for the CMA to be able to review future arrangements where private hospital operators team up with NHS private patient units (PPUs) and prohibit any such arrangements that might substantially lessen competition.
The provisional decision (PDF, 1.49MB, 72 pages) will now go out for consultation until 13 April 2016.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading, as amended by the Enterprise and Regulatory Reform Act 2013.
- The members of the Private Healthcare Market Remittal Group are: Roger Witcomb (Chairman), Tony Morris, Anne Lambert, Jeremy Peat and Jonathan Whiticar.
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