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The CMA has decided, following new evidence, that extra remedies in London’s private healthcare market would not be proportionate.

The Competition Commission, a predecessor body of the Competition and Markets Authority (CMA), started a market investigation into private healthcare in April 2012, which reported in April 2014, immediately after the establishment of the CMA.

The report concluded that certain features of the markets for privately-funded healthcare services were leading to adverse effects on competition (AEC).

A number of remedies introduced in the report, including the provision of greater information about private hospitals’ performance for patients and a crackdown on incentives offered to referring clinicians, have subsequently been implemented.

In the London market, the CMA required HCA International Limited, the largest private hospital operator in central London, to sell 1 or 2 of its hospitals.

However, following an appeal to the Competition Appeal Tribunal, the CMA subsequently acknowledged errors in its statistical analysis and asked the Competition Appeal Tribunal to remit the parts of the findings affected by the errors back to the CMA, for it to reconsider and reach a new decision.

Having corrected the errors and considered the new evidence and submissions received during the remittal, the inquiry group of 5 independent panel members has unanimously confirmed that there is an AEC in the market for private healthcare services in central London and that HCA’s prices are higher than would be expected in a well-functioning market.

The CMA considered a number of possible remedies to address the identified AEC, including its original remedy of the divestiture of hospitals by HCA, but concluded that there were no further remedies, beyond those already put in place, which would be both effective and proportionate. Regarding the divestiture remedy, the CMA concluded that this would be disproportionate. Two of the members dissented from this conclusion.

The remedies already put in place following the initial investigation include:

• The appointment of the Private Healthcare Information Network (PHIN) to provide independent information for private patients on healthcare performance. The website will carry information on, among other things, the performance of private hospitals. The CMA announced last week that from 1 September 2016 hundreds of hospitals must supply relevant data to PHIN which will publish specified performance measures from 30 April 2017.
• A crackdown on benefits and incentive schemes provided to referring clinicians by private hospital operators.
• The ability for the CMA to be able to review future arrangements where private hospital operators are appointed to operate NHS private patient units and prohibit any such arrangements that might substantially lessen competition.

Roger Witcomb, Chairman of the Private Healthcare Market Remittal Group, said:

In our reconsideration of the central London market we have heard new evidence and have confirmed our finding that customers of privately-funded healthcare in central London are paying too much, largely because of HCA’s strong market position.

In our original investigation, we sought to address that problem by requiring HCA to sell 1 or 2 of its central London hospitals. We still believe the market requires more competition. However, the level of uncertainty that now surrounds the likely impact of a divestiture, and the real prospect of new entry into the market adding greater competition over time, mean that we believe divestiture is no longer a proportionate remedy.

We also considered other remedies, such as a price control, but found that none would be effective and proportionate. However we believe that remedies we have already ordered after the original investigation will bring significant benefits to consumers of private healthcare in central London.

The summary of the final report and all other information relating to the investigation are available on the CMA case page. The full final report will be published shortly.

Notes for editors

1. The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading, as amended by the Enterprise and Regulatory Reform Act 2013. For more information see our homepage.
2. For CMA updates, follow us on Twitter @CMAgovuk, Flickr and LinkedIn.
3. The members of the Private Healthcare Market Remittal Group are: Roger Witcomb (Chairman), Anne Lambert, Tony Morris, Jeremy Peat and Jonathan Whiticar.
4. Tony Morris and Jeremy Peat dissented from the decision that a divestiture remedy would not be proportionate.
5. Decisions in the original Private Healthcare investigation were upheld by the courts recently. Separate to the remittal, the Federation of Independent Practitioner Organisations (FIPO) had challenged the CMA’s findings in its final report that there was not an AEC arising from the exercise of buyer power by private medical insurers, and also the CMA’s remedy requiring more publicly available information on consultant fees. In April 2015, the Competition Appeal Tribunal dismissed FIPO’s application for review. FIPO appealed to the Court of Appeal, which on 25 July 2016 unanimously dismissed the appeal, enabling the information remedy to now be implemented.
6. Enquiries should be directed to Simon Belgard (simon.belgard@cma.gsi.gov.uk, 020 3738 6472).