On 14 December 2010, the OFT announced that it is seeking views
prior to launching a market study into private healthcare.
The study will examine the nature of competition in the provision
of private healthcare, market concentration, barriers to entry,
supply-side constraints on consultants and constraints on
consumers.
In the OFT Scoping Paper in which the OFT outlines the focus of
the study, the OFT notes that the private healthcare market
includes a range of medical treatments which are mainly privately
funded, through medical insurance. In 2008, the total value
of the market for private healthcare in the UK was estimated at
more than £5.5 billion. Private hospitals and clinics
accounted for the largest part of the market, generating £3.4
billion in 2008. Fees to surgeons, anaesthetists and
physicians accounted for around £1.6 billion in 2008.
Reasons for the market study
The OFT states that its initial research, prompted by submissions made by a number of participants across the sector, has suggested that the market may not be working well for consumers. It acknowledges that the last formal review of the market was in 1999 and that there have been a number of changes in the market in the intervening period. In particular, consolidation amongst private hospital providers and a move by private medical insurers away from vertical integration towards a reliance on network agreements with private healthcare providers. The NHS has also started to use private healthcare services and has become the second largest funder of private healthcare services.
Scope of the study
Within the Scoping Paper the OFT has identified a number of
areas of concern which it proposes to address in the market
study:
The nature of competition in the provision of private
healthcare. The OFT intends to examine the main
parameters for competition between private healthcare providers,
and the extent to which providers compete on a national, regional
and local basis. The study will also consider how the NHS
impacts on competition, both as a potential supplier and a funding
source for private healthcare.
Market concentration. The OFT proposes to
consider the level of market concentration at national, regional
and local levels and the impact it has on the extent of competition
in the market. The OFT will look at how market concentration
has changed over time, and the impact of market concentration in
terms of price and quality of treatment. The OFT also
proposes to consider the impact of the size of a provider has when
negotiating with insurers, and whether the fact that a provider
operates the only facility in a particular area has any
effect.
Barriers to entry. The OFT will look at
structural barriers and other barriers to entry or expansion in the
market that could deter potential market entrants, or hamper the
ability of recent entrants, or smaller providers to compete
effectively in the market. The OFT will look at factors
including:
- recent market entry and expansion;
- capital and fixed cost requirements for new entry;
- regulatory requirements;
- whether any structural barriers to entry result in, or sustain, higher levels of market concentration at national, regional and local levels;
- the importance, length and exact nature of network agreements between private healthcare providers and insurers; and
- the relative bargaining power of healthcare providers and insurers.
Constraints on consultants. The OFT intends
to consider whether actions of private healthcare providers and/or
insurers act as constraints on the freedom of consultants to
practice to the detriment of consumers. It will look at
healthcare providers' admissions policies for consultants, and
the ability of consultants to split their lists between providers
and will consider how insurers choose which consultants to include
on their approved lists.
Constraints on consumers. The OFT intends to
examine how and when consumers are given choices from the moment
they consult their GP to the moment they receive private
healthcare. It will consider the information that is made
available, when it is made available and whether it is accessible
and useful. The OFT will also look at how GPs choose between
healthcare providers when making a choice on behalf of a
patient.
In terms of services provided to insured patients, the OFT intends
to consider whether the terms of health insurance policies result
in consumer decisions that are likely to have adverse effects on
competition in the market for private medical insurance, whether
switching insurers is made difficult because of the exclusion of
known medical conditions, the role of consultant and patient choice
in driving competition, and how the incentives of private
healthcare providers and insurers are affected by a consumer's
ability (or lack thereof) to choose.
Timings
The OFT welcomes written comments on the scoping paper by
1 February 2011, in particular on whether the
correct issues have been identified. At the moment, it is not
seeking substantive views on these issues. Once the issues
have been confirmed, the OFT plans to launch the market study in
spring 2011. The market study is expected to be completed by
the end of 2011.
A link to the market study home page can be found here and a link to the scoping paper can
be found here.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 14/12/2010.
