April 2, 2014 10:35 am

Regulator scales back order to sell UK private hospitals

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London Bridge hospital©Dreamstime

Private hospital operators were able to claim a significant victory on Wednesday after Britain’s competition watchdog scaled back plans to force them to sell nine luxury hospitals.

The surprise retreat comes despite a two-year investigation into the £5bn private healthcare industry in the UK that concluded they had overcharged patients because they face little competition.

The Competition Commission, rebranded the Competition and Markets Authority this week, said that just one or two hospitals would need to be sold, both by HCA, the world’s largest operator of private hospitals.

Despite the climbdown, Mike Neeb, president and chief executive of HCA International, said he was “furious and possibly a little paranoid” that it had been singled out by the watchdog. The Wall Street-listed corporation was told it must sell either the Wellington Hospital in north London or two smaller sites in the capital: London Bridge and Princess Grace hospitals, all three of which are popular with royals, celebrities and the wealthy.

Mr Neeb said the company had already spent £8m on the watchdog’s inquiry and would spend a further £2m appealing against the decision, which was neither “fair, reasonable or consistent”.

“HCA legally acquired these hospitals, in the case of London Bridge with explicit approval by the Office of Fair Trading, yet now after millions of pounds of investment, it is being forced to sell,” he said.

The commission’s decision marks a significant climbdown from its original determination, made in August, that BMI, HCA and Spire Healthcare had to sell up to 20 hospitals. In January the regulator reduced this to nine, seven by BMI, and two by HCA. Both companies had launched vociferous attacks against the decisions, suggesting the rulings would have been challenged in the courts.

The watchdog said it had “compelling evidence” that HCA, which operates seven hospitals in London, was charging significantly more than competitors and was overcharging for routine procedures. It found that HCA accounted for more than 60 per cent of private cancer care, orthopaedics, obstetrics and gynaecology, and gastrointestinal medicine in the capital.

HCA legally acquired these hospitals . . . yet now after millions of pounds of investment, it is being forced to sell

- Mike Neeb, HCA International chief

The proposals also include a crackdown on incentives for doctors who refer patients to particular private hospitals, and more information on consultant fees and the performance of consultants.

It will also review and potentially block any proposal by a private hospital operator to enter into an agreement to run a private patient unit in an NHS hospital in an area where it is judged to lessen competition.

Eighty-three NHS hospitals have private wings but the number is expected to grow after the Health and Social Care Act removed the limit on private profits being earned by NHS trusts.

This decision is important because it is seen as an easy route for new entrants to the market. Private hospital providers are earning more than a quarter of their revenues from treating NHS patients, up from less than 10 per cent a decade ago. Take-up of private health insurance has stalled as hard-pressed employers cut benefits and insurers place tighter restrictions on claims.

Jenny Block, partner at Pinsent Mason, the law firm, said that last minute changes by the regulator were not uncommon, citing the review into the cement market as an example. “It is inherent in the process that there can be a shift in position from the consultation stage to the final decision,” she said.

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