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Private health groups may have to sell hospitals, competition watchdog rules Private health groups may have to sell hospitals, competition watchdog rules
(about 13 hours later)
The country's largest private hospital groups will have to sell up to 20 hospitals and end incentive schemes that encourage doctors to choose particular private providers for patient treatment in return for cash, a landmark investigation by the competition watchdog has recommended. Britain's largest private hospital groups will have to sell up to 20 hospitals and end incentive schemes that encourage doctors to send patients to particular private providers in return for cash, the competition watchdog has recommended.
The Competition Commission, which began its investigation of the private healthcare sector in April last year, found significant instances of anti-competitive behaviour in the market, and criticised four of the five biggest operators for generating excessive profits. The Competition Commission, which began investigating the private healthcare sector in April last year, found much anti-competitive behaviour in the market, and criticised four of the five biggest operators for generating excessive profits.
The result, says the commission, is that most patients in UK private hospitals are paying more than they should for treatment because of a lack of local competition.The result, says the commission, is that most patients in UK private hospitals are paying more than they should for treatment because of a lack of local competition.
The report says: "There is a causal relationship between self-pay prices and local concentration. Private hospital operators, on average, currently charge somewhat higher prices in local areas where they face fewer competitive constraints." The report said: "There is a causal relationship between self-pay prices and local concentration. Private hospital operators, on average, currently charge somewhat higher prices in local areas where they face fewer competitive constraints."
More than 100 private hospitals around the country are in areas with little rival healthcare provision, said the commission. More than 100 private hospitals around the UK are in areas with little rival healthcare provision, said the commission.
The provisional findings of the inquiry call for up to 20 hospitals to be sold off from the three largest private hospital groups – HCA, Spire and BMI – in 11 locations across the country. Between 2009 and 2011 the three firms had used their market power to amass half a billion pounds to the detriment of consumers, it found. The provisional findings of the inquiry call for up to 20 hospitals to be sold from the three largest private hospital groups – HCA, Spire and BMI – in 11 locations. Between 2009 and 2011 the three firms used their market power to amass £500m to the detriment of consumers, it found.
The watchdog also said that cash bonuses for patient referrals should end – warning that in many cases patients ended up having treatments that they did not need. The watchdog also said cash bonuses for patient referrals should end – warning that many patients ended up having treatments they did not need.
The commission said it was "concerned that consultant incentives might tempt consultants to refer patients to a hospital that they would not have chosen on grounds of either quality or of price and that they might lead to over-treatment or unnecessary diagnostic tests". The commission said it was concerned that incentives "might tempt consultants to refer patients to a hospital they would not have chosen on grounds of either quality or price" possibly leading "to over-treatment or unnecessary diagnostic tests".
These secretive payments are highly controversial in the medical community – leading to claims that doctors can be swayed into over-treating patients. In a case study released this year, the commission noted that payments worth at least £1m had been made to doctors in Bath as part of a "consultant loyalty scheme" by BMI in the three years up to 2012. These secretive payments are highly controversial in the medical community – leading to claims that doctors can be swayed into over-treating patients.
Under a pilot scheme in Bath GPs would "undertake pre-operative examinations of patients referred by them [by BMI] and to receive payment for these examinations in the event that the patient was treated [by BMI]". In a case study released this year, the commission noted that hundreds of thousands of pounds had been paid to doctors in Bath as part of a "consultant loyalty scheme" by BMI in the three years up to 2012.
When the Guardian attempted to use freedom of information requests to ascertain the size and extent of the schemes the commission rejected the approach saying that it would be a criminal act to disclose information obtained in the course of a "market investigation". Under the pilot scheme, GPs would "undertake pre-operative examinations of patients referred by them [by BMI] and to receive payment for these examinations in the event that the patient was treated [by BMI]".
The commission also called for new rules to stop the overcharging of privately insured and self-pay patients by the biggest providers. It said the buying power of health insurance firms did not offset the hospitals' strong position. When the Guardian attempted to use freedom of information requests to ascertain the size and extent of the schemes, the commission rejected the approach, saying that it would be a criminal act to disclose information obtained in the course of a "market investigation".
Four-fifths of private patients pay for their treatment through medical insurance, which is often a perk of their employment. The commission also called for new rules to stop the overcharging of privately insured and self-pay patients by the biggest providers. It said the buying power of health insurance firms did not offset the hospitals' strong position. Four-fifths of private patients pay for their treatment through medical insurance.
Although prices charged by operators to insurers are set nationally, the commission said it believed that the lack of local choice pushed up premiums for all patients, because insurers had no option but to use the local hospital. Although prices charged by operators to insurers are set nationally, the commission said it believed the lack of local choice pushed up premiums for all patients, because insurers had no option but to use the local hospital.
"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," said the commission's chairman, Roger Witcomb. "The lack of competition in the healthcare market at a local level means most private patients are paying more than they should, either for private medical insurance or for self-funded treatment," said the commission's chairman, Roger Witcomb.
"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.""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."
The commission noted that in recent years usage of private hospitals by the NHS in England to provide publicly funded services had grown substantially. Recent studies have shown that spending on private services by the NHS reached a record £8.7bn last year, a jump of more than £3bn since 2006. The commission noted that in recent years usage of private hospitals by the NHS in England to provide publicly funded services had grown substantially.
Recent studies have shown that spending on private services by the NHS reached a record £8.7bn last year, a jump of more than £3bn since 2006.
Paolo Pieri, chief financial officer of Circle, the company behind the complaint that prompted the investigation, said: "We are delighted that we have been vindicated by the Competition Commission and believe more patients will now be able to access our state-of-the-art facilities as a result of this ruling.Paolo Pieri, chief financial officer of Circle, the company behind the complaint that prompted the investigation, said: "We are delighted that we have been vindicated by the Competition Commission and believe more patients will now be able to access our state-of-the-art facilities as a result of this ruling.
"This report is clear that patients across the country have suffered higher prices and poorer care because of the monopolistic behaviour of private hospital providers.""This report is clear that patients across the country have suffered higher prices and poorer care because of the monopolistic behaviour of private hospital providers."
The largest private operators said they did not accept the commission's analysis. Stephen Collier, chief executive of BMI Healthcare, said: "We reject absolutely any assertion that BMI Healthcare and its hospitals exercise market power or that we make excess profits at the expense of patients. The vast majority of BMI's 69 facilities, in a UK market with over 500 rival facilities, face very significant local competition from other private hospitals and, increasingly, from the NHS. The largest private operators said they did not accept the commission's analysis. Stephen Collier, chief executive of BMI Healthcare, said: "We reject absolutely any assertion that BMI Healthcare and its hospitals exercise market power or that we make excess profits at the expense of patients.
"The vast majority of BMI's 69 facilities, in a UK market with over 500 rival facilities, face very significant local competition from other private hospitals and, increasingly, from the NHS.
"The commission's belief that BMI Healthcare makes excess profits ignores financial realities such as the necessary costs of keeping our hospitals equipped with the ever more expensive technology required to meet the needs of patients, commissioners and insurers.""The commission's belief that BMI Healthcare makes excess profits ignores financial realities such as the necessary costs of keeping our hospitals equipped with the ever more expensive technology required to meet the needs of patients, commissioners and insurers."
Another operator, HCA, which runs lucrative private hospitals in the capital, said it "will engage robustly with the Competition Commission". "London has witnessed a strong record of new entry and expansion of private health providers in recent years, demonstrating that barriers to entry are low.
"[The commission] has a legal duty to ensure any remedy is both proportionate and effective; it is difficult to understand how a remedy that would force HCA to divest hospitals in London could be justified on these grounds."