Competition inquiry into healthcare industy

Private healthcare could face intense scrutiny over its practices after the Office of Fair Trading (OFT) criticised the industry over competition issues and revealed plans to pass its investigation to a higher regulator.

The OFT yesterday published its market study finding "a number of features that, individually, or in combination, prevent, restrict or distort competition" in the £5bn private healthcare market.

John Fingleton, the chief executive of the OFT, said: "It is important that patient demand and choice are able to drive competition and innovation in this market with a view to better value for all patients."

The report was drawn up following consultation with the Department of Health, the Financial Services Authority (FSA) and a series of other bodies in the health sector.

The OFT chief said: "We have provisionally decided that these significant concerns merit a more in-depth investigation by the Competition Commission." Companies can respond to the OFT before the end of January, allowing the body to make its final decision two months later.

The regulator criticised the industry saying there was a "lack of easily comparable information available to patients, GPs or health insurance providers" on the quality and costs of its services. There are a limited number of "significant" private healthcare groups which operate at a national level which gives them increased market power, the OFT said.

It added that there were "significant barriers to new competitors entering and being able to offer private patients greater choice". Some private healthcare groups can lift charges or add conditions to an insurer that intends to recognise a new entrant to the market.

"There also appear to be certain incentives given by private healthcare providers to consultants, such as loyalty payments for treating patients at a particular facility, which could raise those barriers further," the watchdog said.

Patricia Lee, the chief executive of Nuffield Health Hospitals – one of the five largest private healthcare groups in the UK, said she supported the OFT's consultation, adding transparency "is vital to allow the consumer a fully informed choice about the best healthcare provider for their needs". She added the move was in the interests of consumers "and the whole industry".

The other major players comprise General Healthcare Group, Spire Healthcare, HCA and Ramsay Health Care. The major health insurers, who will look to contribute to the report include Bupa Health Insurance, AXA and Aviva Healthcare.

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