OFT refers private healthcare market to Competition Commission

On 4 April 2012, the OFT referred the market for privately funded healthcare services in the UK to the Competition Commission (“CC”) for a full market investigation.

This decision follows a market study by the OFT (published on 8 December 2011) and the OFT’s provisional decision in December 2011 to make a market investigation reference to the CC, upon which it publicly consulted.

The OFT believes that the private healthcare (“PH”) market could work in a better way for patients and has found reasonable grounds for suspecting that there are features of the market that, individually or in combination, prevent, restrict or distort competition in the £5 billion UK PH market.

The CC has a maximum of two years in which to carry out its investigation and publish its findings. The following are possible outcomes to a market investigation by the CC:

• forced divestments of businesses or assets;
• imposition of licensing requirements and/or industry-wide technical standards;
• behavioural remedies directing companies to act in a particular way;
• price caps; and
• information remedies, such as a requirement to provide price information to the OFT.

The features of concern highlighted by the OFT include:

Barriers to entry

• Larger PH providers have been including in their contracts with private medical insurance providers (“PMIs”) potentially anti-competitive clauses that are triggered by the acceptance by a PMI of a new PH provider onto its network of PH providers. Such clauses include price-rise clauses and a right for the PH provider already on the network to veto any new entrant.
• Direct and indirect incentives given by PH providers to consultants, such as loyalty payments for treating private patients at a particular facility, could raise barriers to entry.

Lack of transparency

• A lack of accessible, standardised and comparable information on the quality and costs of services appears to weaken the ability of patients and GPs to drive efficiencies and stimulate enhanced competition between rival PH facilities and between consultants.
• Full costs of treatment may not always be transparent for private patients.

Concentration at a local and national level

• The OFT believes that the PH provider market is concentrated at the national level. Areas of high concentration also appear at the local level.
• The existence of areas where there is no alternative fascia PH facility within a 30-minute drive time means that PMIs appear to be dependent on owners of these facilities in order to provide local access to treatment for their policy holders.
• The prevalence of anaesthetist groups is another feature of the market which may reduce price competition in local markets.