Consultants the winners in market which lacks transparency

Patients are getting a raw deal from the private healthcare market, in which consultants and hospitals do not publish information that enables patients and GPs to compare the quality and cost of care, according to the early findings of an investigation by the Office of Fair Trading (OFT).

In the absence of such information, GPs are left to make referrals based on “informal information” about quality, according to a survey of 400 GPs and 400 consultants and in-depth interviews with private patients, commissioned by the OFT. The research has indicated that this lack of “demand side” competition means that neither hospitals nor consultants compete effectively on price or quality, to the detriment of patients’ purses. Private hospitals are competing for consultants, the OFT suggests, using incentives including revenue and equity shares, rather than directly competing for patients based on the price and quality of their facilities.

The OFT has also raised concerns that these incentives may prevent some providers from entering or expanding into the private healthcare market, as these arrangements distort referral patterns and, in some cases, incentivise consultants to direct most of their patients to one facility.

The OFT announced its study of the private healthcare market in November 2010, in the wake of concerns raised by a number of stakeholders including private hospital group Circle Healthcare, which complained that it had encountered significant barriers to entry in the UK market. The group is likely to be pleased by today’s announcement, in which the OFT reported that “providers can use areas where they have local market power to distort or restrict competition in the provision of private healthcare”. For example, in areas where demand can only sustain one private hospital, they may use that facility to leverage price increases to insurers across their network of hospitals or to increase barriers to entry for other providers.

The OFT is to host two roundtables in early September to discuss the concerns raised in the report about the lack of information available to patients and GPs. It is still analysing the issues surrounding consultants and local markets. The final market study report will be published before the end of the year.