Competition watchdog forces fewer hospital sell-offs on private firms

Competition regulators have scaled back what had been hard-hitting reforms of the private healthcare industry, but will still demand the biggest three operators sell around 10 hospitals in proposals expected this week.

Roger Witcomb, the chairman of the Competition Commission’s probe into private healthcare, had demanded that BMI Healthcare, HCA International and Spire Healthcare offload up to 20 hospitals in his initial findings last August. The inquiry team wanted to smash their market dominance after concluding that customers were overpaying for private medical insurance by around £200m a year, while the trio were also said to have made “excess profits of between £519m and £579m in 2009-11.

However, industry insiders believed that the former finance director of National Power had simply put forward a severe opening gambit, fully expecting a backlash from the big three operators. “When you make a provisional announcement on a number of sell-offs there is only one possible direction for that number to go – down,” explained a source close to the inquiry.

Spire’s chief executive, Rob Roger, said at the time: “We strongly disagree with some of the findings, including that there are Spire hospitals facing little competition, that we make excessive profits and that we have disproportionate bargaining power over insurers. These findings, and the remedies proposed, are based on an unrealistic assessment of the markets in which we operate.”

The Independent can reveal the inquiry has taken on board some of these arguments ahead of its provisional decision on ‘remedies’, which are due on Thursday but could slip due to the commission’s hectic schedule. Sources said Mr Witcomb has now decided to demand at the “lower end” of between 10 and 15 hospital sales to foster greater competition in this highly concentrated industry.

“This is going to be seen as a climbdown by the Commission,” said an industry insider. “But the original remedy was deliberately highball. We just wanted to make sure there was a proper divestment programme and between 10 and 15 sales probably falls within that.”

The inquiry will also retain its pledge to abolish the practice of private healthcare operators offering incentives to consultants so that they recommend patients to their hospitals. These incentives are often financial but can also include an operator providing the consultant with free secretarial support.

Companies and individuals are likely to have until next month to comment on the inquiry’s proposals. The final report is due in March.