£5.6bn private health industry faces inquiry

The OFT said it wanted to find out whether the sector was "fully competitive" and serving its customers, which includes the National Health Service, well.

Its investigation will begin next spring after concerns were raised about how the private healthcare market is working.

Before the study starts, the OFT is seeking views on its scope from patients, the NHS and other interested parties.

In a statement, it said: "The private healthcare market is of growing importance due to an ageing population, improved medical outcomes and higher life expectancy. It is also important to the NHS as a result of ongoing Government initiatives which allow NHS patients to seek treatment from private healthcare providers in certain circumstances. The NHS currently accounts for almost one quarter of revenues paid to private healthcare providers."

The OFT plans to analyse the level of concentration among providers of private healthcare at the national, regional and local levels, and whether this limits the extent of competition in the market.

And it wants to find out if any barriers exist to prevent private healthcare providers from entering or expanding in the market.

A study by Laing & Buisson (L&B), one of the biggest providers of data on the healthcare sector, estimated that the market for private healthcare, excluding revenue from mental health hospitals and long-term elderly care, was 5.6bn in 2008. Private hospitals and clinics accounted for the largest part of the market, generating an estimated 3.4bn revenue. Fees to surgeons, anaesthetists and physicians generated an estimated 1.6bn.

According to the L&B Market Review, private medical insurance accounts for 62 per cent of funding for private healthcare providers, followed by NHS-funded patients (23 per cent) and self-pay patients (15 per cent).

The OFT said it was seeking the views of all interested parties in order to refine and confirm the scope of the study. The spokesman added: "The OFT does not presently intend to focus directly on the market for private medical insurance, although aspects of this market's operation will be considered in so far as they affect the provision of private healthcare."

Last month, it was announced that private company Circle is to take over the running of Cambridgeshire's Hinchingbrooke NHS hospital. In September, Circle complained to the OFT about the "anti-competitive nature of the private healthcare market".

It alleges anti-competitive agreements between national private healthcare providers and private medical insurance firms. Circle argues that such agreements act as a barrier and restrict patient choice.

Sonya Branch, OFT senior director of services and public markets, said: 'We are keen to establish whether patients and buyers of private healthcare services, including the NHS, are getting the full benefit of choice and competition. As this is a complex area, we want to engage with providers, patients and Government first to ensure that we identify and focus on the correct issues prior to launching the market study in 2011."

Angelo Basu, an associate in the competition team at law firm Ward Hadaway in Leeds, said: "This is an opportunity for the OFT to have a look at the whole of the private healthcare sector. This is a very wide-ranging pre-consultation exercise that is asking for views and experiences from anyone with an interest in the sector, whether that is as consumers of private healthcare, private healthcare operators or people in the wider health sector.

"It will be a case of 'watch this space' in terms of what arises from this move."