Competition watchdog warns of lack of competition in UK private healthcare market

The UK Competition Commission has warned of a lack of competition among local private healthcare providers, leading to higher insurance premiums and patient charges (full report).

The Commission said it had identified 101 hospitals facing little local competition, some in clusters under the common ownership of major hospital groups like BMI, Spire and HCA.

Competitors like Bupa and AXA PPP have “some buyer power in relation to consultants”, but the commission said it found no evidence to suggest it was being exercised in a way that harmed competition.

Entry into the private health market—or expansion into other areas—is rare due in particular to the high costs of setting up a hospital, the likely response from existing operators and the flat demand for private health services over recent years.

The Commission also noted incentive schemes encouraging 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.

Potential remedies identified include requiring operators to sell hospitals in the “cluster” areas, banning some incentive schemes, measures to improve access to entry to the market, and the provision of better information on prices and quality for patients.

Chariman of the Commission and chairman of the inquiry group Roger Witcomb 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.

Our job has been to look specifically at competition in private healthcare rather than health insurance but clearly we have had to consider the role of the larger insurers in particular. Although Bupa and AXA PPP have some clout, we haven’t found that this completely offsets the power of the hospital operators.

Curing these ills and trying to get a better deal for patients is not going to be straightforward. High costs and other factors mean that new competing facilities are not going to spring up so we may look to increase competition and require sales of hospitals to other operators where we can. We will also look at ways that will stop hospital operators using local strength in one area as leverage in their negotiations nationally.

Although many patients don’t pay directly for the services as they do in other markets, we think that greater comparable information of the sort that is available elsewhere would help drive greater competition on price and quality, potentially improving both. We now want to discuss which of these measures and in what form will be most effective in bringing about the change this market needs.

We’re aware of the disquiet expressed by some patients and consultants in relation to the actions of some health insurers. To the extent that they are trying to keep premiums down and promote competition on price and quality, they are doing exactly what their customers would expect. However, companies like Bupa need to ensure that they communicate better with policyholders about what their premiums entitle them to.