The Competition and Markets Authority has ordered private healthcare operator HCA Hospitals to sell two of its hospitals in central London as part of measure to increase competition in private healthcare and stimulate innovation in the insurance market
Its call follows a two-year investigation by the Competition Commission, one the CMA's predecessor bodies, into health insurers and private hospital operators across the UK.
The CMA said the HCA owned over half of the available overnight private sector bed capacity in central London and charged significantly higher prices to insured patients than its closest competitor.
HCA is required to sell the London Bridge and Princess Grace hospitals or the Wellington hospital including the Wellington Hospital Platinum Medical Centre. CMA is not requiring any hospital sales outside central London.
Other recommendations proposed by the CMA include a crackdown on benefits and incentives provided to referring clinicians by HCA hospitals and measures to increase the availability of information to patients on both consultant fees and the performance of consultants and the private hospitals.
Roger Witcomb, chair of the CMA's private healthcare inquiry group, said the sale of the HCA hospitals would significantly increase competition in central London, in particular by allowing the insurers to offer corporate and individuals policy holders a comprehensive alternative.
'We're also introducing measures which will improve competition across the whole market and ensure private patients get a better deal. A more transparent market with patients actively making choices will drive hospital operators to compete on the things that matter to patients,' he said.
The CMA will also restrict incentive schemes that encourage patient referrals to particular private hospitals, Witcomb added.
But HCA hit back, saying the move would 'punish healthcare innovation and is not in the best interest of patients'. HCA International intends to 'vigorously' challenge the CMA's requirement it in the courts.
HCA International president and chief executive Mike Neeb said: 'In failing to consider our investment, the mix of patients we treat, and the complex procedures we carry, the CMA has drawn inaccurate conclusions about HCA International's pricing - something which we strongly refute and will of course be challenging.
'HCA legally acquired these hospitals, in the case of the 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.
'The CMA's main allegation appears to be that HCA is too successful, too efficient, too innovative. It wants to punish HCA for that success. The proposed remedy sends a very disturbing signal to the market.'
Rival private medical insurer BMI Healthcare has not been required to sell any hospitals despite the CMA finding that many private hospitals faced little competition in local areas across the UK.
Stephen Collier, BMI Healthcare chief executive, said: 'We are pleased that the commission has been able to maintain its open-minded approach throughout what has been a complex and wide-ranging inquiry into a sector still suffering from the effects of recession. The commission has engaged openly with us and with our arguments and evidence, to reach a sensible, measured and fair conclusion.'
On the health insurance market, the CMA found that the two largest insurers - Bupa and AXA PPP - has significant buyer power, but there was no evidence that this was being exercised in a way to harm competition by suppressing fees to uneconomic levels resulting in a shortage of consultants in private practice or a reduction in the innovation and quality of consultant services.
'Indeed, our view was that the incentive was on insurers to promote competition among consultants on price and quality and maintain innovation and quality to protect and improve demand for private medical insurance,' the report stated.
Actuaries Towers Watson added that the review could be a catalyst for change. It said an increase in competition and transparency of information would stimulate growth and new product design.