Competition problems provisionally found in private healthcare
The CMA has provisionally found that lack of price competition is harming customers, after re-examining private healthcare in central London.
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). The CMA required HCA International Limited, the largest private hospital operator in central London, to sell one or two of its hospitals.
HCA 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 today, the CMA has provisionally found that HCA’s large market share, combined with high barriers to entry and expansion in central London, result in HCA facing weak competitive constraints and this leads to HCA charging higher prices to private medical insurers than would be expected in a well-functioning market. This is in addition to the AEC for patients who self-pay in central London, which the CMA identified in its original report and which was not quashed by the CAT.
The CMA is consulting on possible remedies to address the concerns it has identified. The remedies which the CMA is currently minded to consider are:
- the divestment of one or more hospital(s) by HCA
- HCA allowing competitors access to one or more of its hospital(s)
- preventing further expansion by HCA in central London
The CMA will consult on its provisional findings and potential remedies before publishing a final report in March 2016.
Roger Witcomb, Chairman of the Private Healthcare Market Remittal Group, said:
Following a long and thorough re-examination of the issues remitted back to us by the Competition Appeal Tribunal we have provisionally concluded that there is still a competition problem that needs addressing.
We will now consult widely and listen carefully to all responses to our provisional findings and potential remedies before we publish our final report.
The remittal was made after HCA identified errors in the insured pricing analysis during its appeal. As part of the remittal, the CMA revised this analysis and consulted on it through the publication of a working paper on 11 June 2015.
As well as revising its insured pricing analysis, the CMA also took into account all relevant arguments and evidence put to it by parties in relation to the other analysis that supported its original findings.
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 and fees as required by the CMA’s final report. The website will carry information on consultants’ fees along with information on their performance and 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 ban any that might substantially lessen competition.
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.
- For more information on the CMA see our homepage or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on markets cases.
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