UK competition watchdog says private patients pay too much

By Paul Sandle

LONDON (Reuters) - Private healthcare patients in Britain are paying too much because of a lack of competition, the country's market regulator said on Wednesday in a ruling that could lead it to force some operators to sell hospitals.

The Competition Commission (CC) said it had identified 101 private hospitals that faced little local competition, some of them in clusters owned by one of the major hospital groups BMI Healthcare, Spire and HCA International.

It could force operators to sell some hospitals in areas where they dominated, it said, adding that it had pinpointed about 20 such sites.

Asked about the discrepancy between the two figures, a commission spokesman said many areas had local monopolies or duopolies, so forcing sales would make no difference.

The state-run National Health Service (NHS) is by far the leading provider of treatment in Britain, where the market for privately funded healthcare was worth 6.42 billion pounds ($9.98 billion) in 2011, according to consultants Laing and Buisson.

Mark Jackson, special adviser at advisory and restructuring practice Zolfo Cooper, said: "At a time when the private hospital sector is already under pressure from a decline in the take up of private medical insurance and margin pressure from the increased level of NHS work being undertaken, the proposal for the forced divestments of up to 20 hospitals will create further uncertainty in the sector for the hospital groups, lenders and investors."

The CC said that the major health insurance groups, Bupa and AXA PPP, did not have the power to fully offset the dominance of the big private hospital groups.

Presenting the provisional findings of an investigation into the sector, it said this dominance raised insurance costs for all private patients because premiums, often paid by employers, are set nationally.

"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 Competition Commission 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."

HCA CHARGES HIGHEST

BMI, partly owned by South Africa's Netcare and private equity group Apax Partners, is the biggest private operator, with 69 hospitals, while Spire, owned by private equity group Cinven, owns 37.

HCA International, owned by U.S. group HCA Holdings Inc, charged significantly higher prices than other operators, the CC said, even allowing for higher costs of running its six London-based hospitals.

The three operators also faced little competition from new entrants in the market because of the high costs of setting up a hospital and flat demand for private healthcare services in recent years, it said.

The top five healthcare providers, which also include Ramsay Health Care UK and Nuffield Health, accounted for about 77 percent of the market by revenue in 2010, according to a 2011 report by the Office of Fair Trading. Smaller providers include Abbey, Aspen Healthcare, The London Clinic and The Horder Centre.

BMI said it disagreed with many of the findings of the investigation, and said it did not "hold the whip hand" in its relationship with insurers.

"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," Chief Executive Stephen Collier said in a statement.

"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."

HCA International said it was disappointed in some of the findings. "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," it said in a statement.

Spire did not respond to a request for comment.

The Competition Commission's consultation is open until next month, and a final report will be published by April 2014. ($1 = 0.6435 British pounds)

(Editing by Mark Trevelyan)