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Private healthcare market may be anti-competitive with poor returns for patients

BMJ 2012; 344 doi: http://dx.doi.org/10.1136/bmj.e2606 (Published 05 April 2012) Cite this as: BMJ 2012;344:e2606
  1. Nigel Hawkes
  1. 1London

The Office of Fair Trading (OFT) has referred the private healthcare market to the Competition Commission, saying that it is not working properly for consumers. It warned last December that it intended to make the referral and the results of a public consultation since then have not changed its mind.

The OFT is critical of a lack of the information needed by consumers to make informed decisions and says that local monopolies and the ability of existing providers to make it difficult for new entrants to the market distort competition. As a result patients might pay higher prices than they need to or get poorer quality care.

In its market study, the OFT says that private healthcare was worth about £5bn (€6bn; $7.9bn) in 2010, with private hospitals and clinics accounting for £2.89bn of this. Most patients (78%) pay for their care through private medical insurance, which covers almost 16% of the UK population.

“The private healthcare market clearly provides a valuable service which benefits patients,” the study says. “However, having considered carefully the consultation responses, the OFT considers there are a number of features of this market that, individually or in combination, prevent, restrict or distort competition.”

The OFT investigation was triggered by a complaint from Circle Health, a new entrant to the market, which complained that it was being obstructed. Ali Parsa, chief executive of Circle Health, welcomed the referral. “As the only new entrant in the last two decades our partnership has faced constant battles against cost industry agreements that lock out newcomers and put incumbents’ commercial concerns ahead of patients’ interests. This is great news for any entrepreneur, clinician, or small enterprise with innovative ideas on improving healthcare delivery and marks a massive victory for patients as consumers.”

The decision was also welcomed by the health insurers BUPA. Natalie-Jane Macdonald, managing director of BUPA health and wellbeing, said: “The cost of private healthcare has been rising to unsustainable levels in large part because of a lack of competition and efficiency in the private hospital market and among consultants in private practice. We are pleased that the Competition Commission will now be investigating this and we will be engaging with them on behalf of our members.”

The OFT study says that costs and quality of care are hard for patients and insurers to assess, and that patients cannot easily calculate any shortfall they will have to pay when an insurer’s payment schedules do not cover a consultant’s full fees. The market is also concentrated in relatively few hands, limiting the power of insurers to bear down on costs. This is further constrained because the insurers must be able to provide cover nationally, which means they cannot refuse to deal with overpriced providers who, in some local areas, may have a monopoly. Insurers also have limited ability to direct patients to particular facilities since GPs rather than insurers recommend consultants and it is the consultants who often determine where patients will go.

Anaesthetists’ fees are named as one specific area where price competition might have been restricted. Patients have complained to the OFT that they cannot find an anaesthetist who will charge within their insurer’s fee schedules and the OFT suggests that the formation of local anaesthetists’ groups, to which 44% of anaesthetists belong, may be anti-competitive.

Notes

Cite this as: BMJ 2012;344:e2606

Footnotes