OFT refers private healthcare market to Competition Commission

Widely expected move welcomed by insurers

The Office of Fair Trading (OFT) has confirmed that it has referred the market for privately-funded healthcare services in the UK to the Competition Commission for further investigation.

The decision – which was widely expected – follows a provisional decision by the OFT to make a market investigation reference when it published its private healthcare market study in December 2011. The OFT then undertook a public consultation on its findings which closed in January 2012.

The OFT said today that continues to hold the view that the private healthcare market “could work better” for patients, and that there are “reasonable grounds” for suspecting that there are features of the market that prevent, restrict or distort competition.

OFT chief executive John Fingleton said the private healthcare sector is likely to continue to be of growing importance to the nation's population and economy and so it is important that the market works well.

He added: “Yet private patients and their GPs face difficulties selecting private healthcare providers on the basis of quality or value for money, and this may ultimately result in patients paying higher prices, or receiving lower quality care. Following extensive consultation, we have concluded that an in-depth investigation by the Competition Commission is the most appropriate means of investigating and potentially remedying the market problems we have identified.”

The OFT said there is a lack of easily comparable information available to patients and their GPs on the quality and costs of private healthcare services, meaning that competition between private healthcare providers and between consultants is "not as effective as it could be". In addition, the full costs of treatment may not always be transparent for private patients

It also said that there are only a limited number of significant private healthcare providers and larger health insurance providers at a national level. There are pockets of particularly high concentration in some local areas where private patients have a limited choice of hospital. Given the desire for patients to be treated locally, this may mean that insurance providers will generally rely on these larger healthcare providers to provide this access to treatment for their policyholders.

Finally, the OFT said its consultation found that a number of the features of the private healthcare market combine to create "significant barriers" to new competitors entering the market and being able to offer private patients greater choice. For example, some larger private healthcare providers can impose price rises or set other conditions if an insurer proposes to recognise a new entrant on its network. There also appear to be "certain incentives" given by private healthcare providers to consultants, such as loyalty payments for treating private patients at a particular facility, which could raise those barriers further, the OFT said.

Insurers welcomed the OFT’s decision. Mark Noble, Aviva’s health and group risk director (UK health), said he believes find that patients do not have “visibility of costs and quality” when they are making choices about their healthcare provision.

He added: “We also recognise that increasingly private medical insurance cover is funded by employers and the lack of transparency is magnified at the whole company level.”

The private healthcare market has generated heated debate over recent months between hospitals, medical insurers and consultants and doctors.

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