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Business Comment

Mark Leftly: For the health of the NHS, private operators need drastic surgery

The only danger is that Mr Wicomb backs away from pushing for the stronger demands

It is no exaggeration to say that this week the Competition Commission (CC) could safeguard the entire future of the NHS.

Well, that might be a bit melodramatic. But the watchdog's investigation into the private healthcare market has been so woefully under-reported given its significance to nearly all of our lives that a touch of hyperbole is justified.

The CC is looking into a situation where just five private-sector hospital operators – General Healthcare Group, Nuffield Health Hospitals, Ramsay Health Care UK, Spire Healthcare and HCA – dominate this £5bn market.

If the inquiry team, led by former National Power finance director Roger Witcomb, can find a way of smashing open private healthcare that will lead to reduced costs then many of us will finally have an affordable alternative to the NHS.

And that would bring down the NHS's enormous costs as well as help dramatically reduce what is now nearly 2.9 million patients on its waiting list – a five-year high.

In an age of austerity, the NHS is proving a burden that the country struggles to afford, and might not be able to the next time bankers', credit agencies' and auditors' failings collide to create something close to financial Armageddon.

Mr Witcomb will release his provisional findings into the market and his preferred ways of fostering greater competition in the next few days. The word "provisional", though, is misleading, as what typically happens is that all bar the most extreme and clearly unworkable of the CC's recommendations are adopted when a final report is issued months later.

Already we know that the CC will clamp down on a situation that sees consultants paid for referring patients to certain hospitals. Remarkably, this can even involve hospital groups providing secretarial support to consultants, which is clearly closer to a bribe than an act of altruism.

What many of the insurers and hospitals think that the CC is unlikely to do is demand that the big five sell off swathes of hospitals to encourage more operators into the market. That's a shame, but could be far more difficult to push through than the years of legal wrangling it took for the commission to force BAA into selling Edinburgh, Gatwick and Stansted airports in what were clear-cut monopolies.

HCA is the one operator that industry insiders think might still be forced to divest, given its iron grip on a London market which accounts for around one-third of private hospital revenue.

The only other sales that are considered likely to be demanded will be targeted at those operators that have several hospitals which have no other private facility within a 45-minute journey time. That's about the limit of how far people are willing to travel for private healthcare, meaning that if there is a hospital with no rival in that radius it is an effective monopoly.

As the CC can hardly demand the construction of more private hospitals, it could seek to limit the number of any of these monopolistic facilities that a company owns. Otherwise, should an insurer play hardball on costs in one of these mini-monopolies, it might find itself excluded from other single hospital areas owned by that operator.

There also seems to be a strong case for what is known as automatic recognition. A smaller operator, Circle Holdings, first complained about the market to the Office of Fair Trading in 2010 and private healthcare was later referred to the commission.

According to the CC's analysis, AXA PPP did not recognise Circle's new £33m, Lord Foster-designed 57-bed hospital nine miles south of Bath, as it was worried about its broader, national relationship with the other operator in the area, BMI. A natural result is that consultants would be less likely to perform operations at a hospital that lacked recognition of one of the major insurers as there would be less guarantee of work.

As one market insider puts it, without automatic recognition of all private hospitals in a region "you can end up with an empty hospital, preventing new entrants from coming into the market".

These are just a handful of the problems of a market where consultants form groups that look suspiciously like cartels and Bupa has been mercilessly blasted by patients as "taking the Mickey" and "moving the goalposts to avoid honouring their terms".

The only danger is that Mr Witcomb backs away from pushing for many of the stronger demands he could make, out of fear that the hospital groups could delay reforms through years of appeals at domestic and European level.

However detrimental those delays are, such as putting off operators from investing in their facilities, he will hopefully realise that this is an argument the commission would surely ultimately win.

Mr Witcomb this week has not only the opportunity to take an axe to this ludicrously contrived market of nods, winks and dodgy deals – he also has a duty to do so, for all our health.