By Marcus Leach

The Office of Fair Trading (OFT) has provisionally decided to refer the market for privately funded healthcare services in the UK to the Competition Commission for further investigation.

In its market study, published today (Thursday), the OFT has provisionally found a number of features that, individually or in combination, prevent, restrict or distort competition in the £5 billion UK private healthcare market.

The OFT has provisionally found that:

- There is a lack of easily comparable information available to patients, GPs or health insurance providers on the quality and costs of private healthcare services. This may mean that competition between private healthcare providers and between consultants is not as effective as it could be. In addition, the full costs of treatment may not always be transparent for private patients.

- There are only a limited number of significant private healthcare providers and of larger health insurance providers at a national level. There are pockets of particularly high concentration in some local areas where private healthcare providers own the only local hospital or a 'must have' facility. This may give a degree of market power to healthcare providers in these areas, as the larger insurance providers will generally rely on them to be able to provide full national coverage to policyholders.

- A number of features of the private healthcare market combine to create significant barriers to new competitors entering and being able to offer private patients greater choice. For example, some larger private healthcare providers can impose price rises or set other conditions if an insurer proposes to recognise a new entrant on its network. There also appear to be certain incentives given by private healthcare providers to consultants, such as loyalty payments for treating patients at a particular facility, which could raise those barriers further.

During the course of its study, the OFT worked closely with the Department of Health, the Financial Services Authority and a number of health sector bodies. The OFT welcomes the fact that, as a result of concerns it raised during the study, the FSA will work with the Association of British Insurers (ABI) and health insurance providers to make it clearer for patients that they may face extra shortfall payments when there are limits which apply to the amount payable under their insurance policies.

"Our provisional findings suggest that private patients in the UK don't have access to easily comparable information on quality and costs and that competition is also restricted by barriers to new private healthcare providers entering and being able to offer private patients greater choice," John Fingleton, OFT Chief Executive, said.

"It is important that patient demand and choice are able to drive competition and innovation in this market with a view to better value for all patients.

"We have provisionally decided that these significant concerns merit a more in-depth investigation by the Competition Commission."

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