Measures introduced in the Competition and Markets Authority’s (CMA) final report into increasing competition in the private healthcare market could result in lower private medical insurance (PMI) premiums and new PMI product design.
Its Private healthcare market investigation final report has announced measures including a crackdown on benefits and incentive schemes awarded by private healthcare providers referring clinicians for treating patients at their facilities.
The report found these incentive schemes to be a problem that can lead to referrals being driven by considerations rather than quality and price.
The CMA’s report also sets out a number of remedy packages to address a lack of competition and consumer detriment issues in the market.
It follows a two-year investigation into the private healthcare market, after the Office of Fair Trading referred the private healthcare market to the Competition Commission, which is now part of the CMA.
The report also found a lack of sufficient publicly available performance information on private healthcare services by private hospital operators. As a result, they will now be required to provide clarity on costs and the quality of treatment.
The CMA’s remedies package include:
- A restriction or ban on certain benefits and incentive schemes provided by private hospital operators to clinicians.
- A combination of measures to improve the public availability of information on consultant fees and of information on the performance of consultants and private hospitals.
- The divestiture by Hospital Corporation of America (HCA) of either the London Bridge and the Princess Grace hospitals or the Wellington hospital.
- Measures to ensure that arrangements between NHS trusts and private hospital operators to operate or manage private patient units (PPU) will be capable of review by the CMA. The CMA will be able to prohibit arrangements which it decides substantially lessen competition in the relevant local area.
Roger Witcomb, chairman of the group and CMA panel chair, said: “These are measures which will bring changes across the country. The sale of HCA hospitals will significantly increase competition in central London, in particular by allowing the insurers to offer organisations and individual policyholders a comprehensive alternative to HCA.
“We’re also introducing measures which will improve competition across the whole market and ensure private patients get a better deal.
“Greater information on the performance of hospital operators and of consultants as well as consultants’ fees will allow patients to make far better informed choices about what they are paying for, when deciding which hospital and consultant to choose for their treatment.
“Equally, we are going to restrict incentive schemes that encourage patient referrals to particular private hospitals, again so that the advice given by consultants is driven solely by the merits of individual facilities.”
Joanne Anderson, senior healthcare consultant at Towers Watson, added: “This review could be the catalyst that invigorates change. Increased competition and transparency of information will stimulate growth and new product design.
“Earlier this year, we predicted that more employers will challenge the one-size-fits-all approach to healthcare benefits by implementing segmentation to provide benefit levels that are more relevant to specific employee groups.”
Greater access to data will make it easier for employers to differentiate the service propositions of insurers and administrators and move away from purely cost-based discussions. We urge employers to use this fundamental change as a springboard for re-evaluating whether their current healthcare provision remains relevant for their employees’ needs.
Given that approximately 80% of individuals covered by private healthcare are covered as part of an employer-sponsored arrangement, encouraging individual patient choice has the potential to directly affect the dynamic of group schemes. Multiple individual buying decisions may not equate to the same buying decision the employer has historically made for the scheme as a whole, in terms of hospital and consultant eligibility.
It is paramount that, at a time when patients are in emotional turmoil, they are able to easily review all their options. This requires a level of transparency in the market that will prevent clinicians from charging over the typical market rate. It also requires hospitals and consultants to provide details of clinical outcomes before a scheduled review in 2019. We hope that this investigation will lead to private medical administrators, hospital groups and clinicians working collaboratively with the patient to achieve better outcomes.
Private healthcare continues to be one of the most highly valued employee benefits. In fact, it was ranked as the number one benefit employees would find personally valuable in our employee insight survey last year, beating workplace pensions, which came in as the second most valued benefit.
However, the increasing cost of private healthcare has meant organisations have shied away from offering all employees cover and many have had to impose caps or offer less comprehensive plans to staff who receive private healthcare as an employee benefit.
The report shines a light on these spiralling costs and goes some way to address the issue. A short-term effect of the report will likely be lowered premiums for organisations that offer employees private healthcare as a benefit.
These savings, however, are unlikely to be passed on to employees as few organisations will offer more complete cover or open out private healthcare to a larger proportion of their workforce. The reason for this is that the report does not tackle some of the embedded issues within the private healthcare market, such as medical inflation. As such, we will continue to see private healthcare the preserve of the few.
So, while we welcome the report and its recommendations, we recognise its limitations. It should therefore be viewed as a catalyst for the wider market – including insurers, providers and employer representatives – to develop healthcare propositions that are relevant, affordable and sustainable to all organisations.