Turmoil in Spain and Australia hits Bupa

The private medical group Bupa showed the scale of the task facing its new management team yesterday as turmoil at its Spanish and Australian arms saw half-year profits plunge 15 per cent to £218m, while its UK business faces a Competition Commission inquiry.

Since Stuart Fletcher took over as chief executive last March, Bupa has splashed out on a string of acquisitions, and overhauled its British operation by splitting its health insurance and clinics businesses into separate divisions. The move saw a string of top executives depart, but couldn't stop UK profits falling – last year they dipped by a fifth to £109.7m.

This time around the medical group, which has 13 million customers in 190 countries, saw its profit in the UK soar – more than doubling from £26.4m in the first half of 2012 to £59.2m this year. That's despite its number of customers actually falling 3 per cent to 2.8 million, but Mr Fletcher admitted the higher profit came from "improved claims cost management", that is, paying out less to sick and injured members, which was a core complaint lodged by policyholders to the Competition Commission.

As the body investigates whether the £5bn private healthcare industry is hampered by a lack of competition, complaints about Bupa include claims that its practices deny "an option of choice of medical consultant", and that "Bupa now has a policy of only using surgeons who will operate at the least cost to themselves".

But Mr Fletcher said: "The Competition Commission clearly stated in April that absent Bupa and insurers implementing caps and controls on what they're willing to pay consultants and hospitals for procedures, there would be very little constraints on the rising costs of premiums. We're managing both the quality of care provided and the cost of care by only working with those consultants who work to pre-agreed fees."

Bupa, whose marketing effort includes sponsorship of the Great North Run, set new caps on fees it pays out for around 250 procedures last year.

"Most fees came down," Mr Fletcher said. If patients want to use surgeons who charge more, "then they know a top-up fee will apply".

The Competition Commission is examining whether the dominance of just five private-sector hospital operators – General Healthcare Group, Nuffield Health Hospitals, Ramsay Health Care UK, Spire Healthcare and HCA – holds back competition.

Elsewhere, the medical insurer saw half-year profits in its Australian business fall 9 per cent to £115.9m, which it blamed on regulatory reforms in the country, while in austerity-hit Spain profit fell 13 per cent to £46m.