Start date: 10 March 2011, MIR completed 4 April 2012.
The OFT has decided to refer the market for Private Health (PH) to the Competition Commission for a market investigation.
On 8 December 2011, the OFT published a consultation document setting out the provisional decision to refer to the PH market in the UK to the CC and opened a public consultation. The consultation document set out a number of features that the OFT considered, individually or in combination, prevent, restrict or distort competition in this market. We consider that these features of the PH market impair the ability of patients, GPs and PMI providers to choose between competing service providers, including new entrants, on the basis of superior quality of services to patients and better value for money.
The consultation closed on 30 January 2012. Having carefully considered all the comments and evidence received during the consultation, the OFT continues to be of the view that there are a number of features that, individually or in combination, prevent, restrict or distort competition in this market.
The features identified are:
Information asymmetries - the shortage of accessible, standardised and comparable information appears to weaken the ability of patients and GPs to drive efficiencies and stimulate enhanced competition between rival PH facilities and between consultants, and may give rise to a dampening of competition in the market overall.
Concentration - the PH provider market appears to be concentrated at the national level. At the local level there appear to be areas of high concentration, such as areas where there is no alternative fascia PH facility within a 30-minute drive time of a PH facility (solus PH facilities). The existence of solus and PH facilities means that PMI providers appear to be dependent on the PH providers that own these facilities in order to provide local access for their policyholders. The size of the larger PMI providers appears to result in a degree of buyer power. However, their ability to exercise this may be limited.
Forty-four per cent of anaesthetists are part of an Anaesthetist Group (AG). The prevalence of AG groups is also a feature of the market which may reduce price competition in local markets (particularly in view of switching costs such as the costs associated with postponing treatment or travelling to an alternative facility).
Barriers to entry - we consider that a number of features of the PH market combine to create significant barriers to entry. For example, some larger PH providers can impose price rises or set other conditions should a PMI provider recognise a new entrant on its network. There also appear to be direct and indirect incentives given by PH providers to consultants, which could raise those barriers further.
The OFT, in exercise of its powers under Sections 131 and 133 of the Enterprise Act 2002 (the Act) has referred the supply and acquisition of PH in the UK to the Competition Commission for investigation.
Press releases
Team leader: Sue Aspinall (020 7211 8788, sue.aspinall@oft.gsi.gov.uk)
Project director: Ed Smith (020 7211 8434, ed.smith@oft.gsi.gov.uk)
Senior responsible officer: Sonya Branch (020 7211 8707, sonya.branch@oft.gsi.gov.uk)
Any media enquiries should be directed to a member of our Press Office.
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