UK: OFT Announces Market Study Into Private Healthcare

Last Updated: 15 December 2010
Article by Susan Hankey and Caroline Hobson

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.


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

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.

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