Fair trading probe at PPP

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The Office of Fair Trading has opened what it describes as an "informal inquiry" into allegations of potential fair trading abuses by PPP, the private medical insurance company.

PPP has been accused of limiting the choice of its subscribers by reducing the number of hospitals it uses in order to fill them to full capacity. Charity hospitals, which fall outside the umbrella of the National Health Service or the larger private concerns, believe PPP's strategy could put them out of business altogether.

PPP defends its strategy. "In the private-hospital sector, bed occupancy rates are not much more than 50 per cent, and in some cases are as low as 20 per cent. By creating a network of preferred providers, we hope to increase occupancy rates in chosen hospitals, and that will feed back into lower premium rates for our patients," said a spokesman.

PPP has so far cancelled contracts with four charitable hospitals. The second largest private medical insurer in the country after Bupa, PPP provides around a quarter of all the paid-for business of these hospitals.

Malcolm Jones is chief executive of the Order of Bon Secours nuns in the UK, which runs three hospitals, and four nursing homes. In Sheffield, the charity was recently asked to tender for its contract with PPP. It lost the contract to the only other private hospital in Sheffield, run by BMI. The process was repeated in Glasgow, where Bon Secours also lost out to a BMI hospital.

Bon Secours is now awaiting the result of a tender procedure at its hospital in Beaconsfield, Buckinghamshire. Mr Jones is resigned to the prospect of losing this tender as well, as there is a BMI-owned hospital in Beaconsfield.

The OFT's interest stems from the impact these developments may have on the consumer. While PPP argues that the preferred network will lead to lower charges, some hospitals dispute that. Mr Jones says of his hospital in Sheffield: "I would be staggered if the BMI hospital could have tendered at a lower price while we have extremely modern facilities including CT and MRI scanners."

Another case is that of St John's & St Elizabeth's in north London, unceremoniously dumped by PPP as a healthcare provider from October. Now that St John's has been removed from the list of hospital bed providers, PPP patients will have to go to the nearby Wellington hospital, jointly owned by PPP and the US health insurer HCA/Columbia.

Chris Board, chief executive of St John's & St Elizabeth's, says he still does not understand why the hospital was dropped. He says PPP told him it made the decision on the basis of price, quality and service. Yet the hospital has similar facilities to those owned by PPP and is, he believes, significantly cheaper.

PPP said: "There are other hospitals in central London better placed to satisfy the requirements of our customers."

Gerald Pilkington, executive manager of CHF, a federation of charitable hospitals, is disturbed by what he sees as a pattern behind PPP's tactics. "We are not in favour of products that force PPP's customers to certain hospitals. We believe they inhibit choice; the choice of hospital a patient can go to, the choice of consultant, and ensuring the patient has the best possible care."

While PPP says it has no links with other healthcare or bed providers, it purchased its three central London hospitals from BMI.

The charity hospitals suspect PPP may be trying to increase business to BMI in case it wants to buy the company at a future date. PPP has made no secret of the fact that it wants to expand its presence as a hospital owner.