GP hospital incentives facing ban

Regulator will order private operators to stop handing doctors cash and free secretaries

Private hospital operators are set to be banned from providing financial incentives to doctors who refer patients to their facilities, as the Competition Commission looks to crack open the £5bn market.

A delayed inquiry report into private hospitals, which are dominated by five operators, is finally due to come out next month having been due in June.

Private medical insurance typically costs nearly £1,100 a year, according to healthcare intelligence group Laing & Buisson, an amount that any commission action could help to push down.

The commission is expected to take a hard line with the industry. This reflects the increasingly tough stance the commission is taking on the markets it investigates, from tackling the Big Four auditors to forcing airport group BAA to sell-off Gatwick and Stansted.

Sources aware of the thinking of the inquiry team, which is led by former National Power finance director Roger Witcomb, said they have been particularly concerned by referral fees and other incentives offered by the operators.

These can even include providing doctors with free secretarial support, which the inquiry worries ends up effectively coercing them into referring patients to their hospitals.

A source said: "Dodgy-looking incentives are not the sort of thing that the regulator is going to look kindly on. Making decisions based on incentives is unlikely to be helpful towards competition."

The big players are: General Healthcare Group, which is owned by private-equity giant Apax Partners; Spire, which buyout group Cinven bought from Bupa for a 2007 top-of-the-market price of £1.4bn; registered charity Nuffield Health; Ramsay Health Care UK, the British subsidiary of an Australian private-hospital empire; and HCA, a US-listed behemoth that made a revenue of $33bn (£21.6bn) last year.

The commission is also concerned that some regions appear to be overwhelmed by just one of these groups. For example, one submission to the commission argued that HCS had a "super-dominant position" in cancer services in London, owning six out of the capital's seven elite private hospitals.

The private equity-owned pair might particularly suffer should the commission demand sell-offs of their hospitals. Forced sales typically mean low price tags, potentially "devaluing" Apax's and Cinven's investments, according to an industry insider.