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02.04.14

Private heath firm forced to sell hospitals to increase competition

The Competition and Markets Authority (CMA) is forcing private health group HCA International to sell off either its London Bridge and Princess Grace hospitals or the Wellington hospital, including Wellington hospital Platinum Medical Centre (PMC), because of a lack of competition for self-pay and insured patients in central London.

The CMA said its decision will improve price, quality and range.

Private hospital operators’ partnership deals with NHS private patient units (PPUs) could also be banned if they “substantially lessen competition” in the private healthcare market, following a two-year investigation by the CMA, the successor to the Competition Commission.

The CMA’s new report also suggests that measures to ensure arrangements between NHS trusts and private hospital operators to “operate” or “manage” a PPU could be reviewed by the CMA, which will be able to prohibit arrangements which it decides significantly lessen competition in the relevant local area.

In the 2012/13 financial year, NHS England generated approximately £500m in revenue from the provision of privately-funded healthcare services (contributing 8% of total private healthcare industry revenue), either in dedicated PPUs or in private beds in NHS hospitals, the research revealed.

Additionally, around 96% of total UK NHS private patient revenues are generated in England while 1.6 % of revenues are generated in Wales, 1.2% in Northern Ireland and 0.9% in Scotland. The majority of PPU capacity is located in London and south-east England

It has also been recommended that NHS and foundation trusts, when seeking to agree partnership arrangements, should consider that the PPUs may be at a potential “competitive advantage” in the privately-funded healthcare market due to any implicit, non-market benefits they could receive from their connections to the NHS.

Roger Witcomb, chairman of the Private Healthcare Inquiry Group, said: “The sale of HCA hospitals will significantly increase competition in central London, in particular by allowing the insurers to offer corporates and individual policyholders a comprehensive alternative to HCA.

“We’re also introducing measures which will improve competition across the whole market and ensure private patients get a better deal. Greater information on the performance of hospital operators and of consultants as well as consultants’ fees will allow patients to make far better informed choices about what they are paying for, when deciding which hospital and consultant to choose for their treatment. A more transparent market with patients actively making choices will drive hospital operators to compete on the things that matter to patients.”

In general, the CMA has found that many private hospitals face little competition in local areas across the UK and that there are high barriers to entry. This, in turn, leads to higher prices for self-pay patients in many local areas – and for both self-pay and insured patients in central London, where HCA, which owns over half of the available overnight bed capacity, charges significantly higher prices to insured patients than its closest competitor.

The report states: “Opening up this market to greater competition is not easy because there are high barriers to entry. High costs and long lead times mean that new competing facilities are not going to spring up easily.

“What we have done is to tackle some of the other barriers which can prevent a new operator getting a foothold in a particular area and to focus on measures which will improve things for patients in all areas of the country.”

Discussing the CMA’s ruling on its central London hospitals, Mike Neeb, president and CEO of HCA International, said: “HCA International made significant investments to transform these facilities into some of London's leading hospitals. In failing to consider our investment, the mix of patients we treat and the complex procedures we carry, the CMA has drawn inaccurate conclusions about HCA International's pricing – something which we strongly refute and will of course be challenging.”

BMI Healthcare escaped without having to sell any of its centres, despite earlier warnings that it might have to. Its chief executive Stephen Collier told Reuters that the CMA had reached a “sensible, measured and fair conclusion”.

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