Jim Armitage: In pointing out how Bupa was right, commission opens a can of worms
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Thursday 29 August 2013
Outlook It feels instinctively wrong to be rooting for the big guy. But in the messed-up world of private healthcare provision, that is precisely what we should be doing.
For many years, Bupa, the country's biggest provider of medical insurance, has been seeing customer numbers slide due to the unaffordability of its premiums for most people. And for many years, it has been complaining about getting ripped off by the hospitals which abuse their quasi-monopoly position.
Now, in the starkest terms, the Competition Commission has said that Bupa is right.
Despite all the muscle that goes with being the biggest health insurance company in the country – with £4.5bn of sales in the first half – it was still unable to avoid being fleeced.
You need only a quick glance at the numbers to see the impact of the racket: the backers of private hospitals are getting back more than double the cost of their investment, with that profitability increasing sharply thanks to low interest rates. The commission calculates that this means insurers – and therefore consumers – are being ripped off by up to £193m a year.
Bupa, meanwhile, is having to clamp down on paying claims in order to stem the financial impact of losing 100,000 or more customers every six months.
Little wonder, then, that private equity firms have been big backers of the sector, with Cinven in particular piling in. So confident has it been in its backing of Spire – the biggest provider in the country – that earlier this year it decided the time was right to sell and lease back a third of its properties. (Some will recall how a similar tactic helped send Southern Cross off to that corporate care home in the sky.)
Cinven was also, until 2000, a big investor in the operator of BMI Healthcare, one of the other hospital operators criticised by the Competition Commission. Nowadays BMI, and the third major named-and-shamed operator, HCA, are owned by foreign operators.
While the Competition Commission is clearly right to recommend breaking up the local strangleholds these businesses have in certain parts of the country, it must be aware of the fickle nature of private equity and foreign investors.
If they no longer feel their investments here are yielding sufficient returns (and with interest rates likely to rise in the coming years, this will become a growing issue) they may decide to scale down or pull out of the UK altogether.
Bupa really would be in trouble then. But, more importantly, given how a growing proportion of NHS work is nowadays being handled by the private sector, so would we all.
- 1 I've been called an abusive and dangerous parent, when all I did was listen to my transgender child
- 2 Why this father didn’t hide his daughter’s heroin overdose in her obituary
- 3 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 4 Teaching profession headed for crisis as numbers continue to drop and working lives become 'unbearable'
- 5 The most powerful passports in the world
Nepal earthquake in pictures: Photos show devastation caused by 7.8 magnitude earthquake
Smartphones are making children borderline autistic, says psychiatrist
Nepal earthquake: The race is on to help thousands trapped under rubble around Kathmandu, while remote villages face a long wait for help
Royal baby: Live updates as superbug closes ward at St Mary's Hospital where Duchess of Cambridge is due to give birth
Teaching profession headed for crisis as numbers continue to drop and working lives become 'unbearable'
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...