Private Medical Insurance (PMI) premiums are higher than necessary as private hospitals face little competition in local areas across the UK, the Competition Commission (CC) has found.
It has estimated that consumer detriment caused by the market power of private hospital networks is between £173 million and £193 million a year between 2009 and 2011, equivalent to 11% of the private revenues of hospital operators.
The CC has also pinpointed incentive schemes, which encourage consultants to choose particular private providers for diagnosis and treatment.
In its provisional findings on privately-funded healthcare services, the CC identified 101 hospitals facing little local competition, some in clusters of hospitals under the common ownership of one of the major hospital groups, namely BMI, Spire and HCA.
Entry or expansion into other areas is rare due in particular to the high costs of setting up a hospital and flat demand over recent years.
The CC believes that lack of competition in many local areas, where insurers will have little choice but to use the local operator, results in higher premiums for all patients.
It has provisionally concluded that whilst the larger insurers such as AXA PPP and particularly Bupa have some countervailing strength, it is not enough to offset the hospital groups' strong position.
CC Chairman and Chairman of the Private Healthcare Inquiry Group, Roger Witcomb said: "Our job has been to look specifically at competition in private healthcare rather than health insurance but clearly we have had to consider the role of the larger insurers in particular.
"Although Bupa and AXA PPP have some clout, we haven't found that this completely offsets the power of the hospital operators.
"Curing these ills and trying to get a better deal for patients is not going to be straightforward. High costs and other factors mean that new competing facilities are not going to spring up so we may look to increase competition and require sales of hospitals to other operators where we can.
"We will also look at ways that will stop hospital operators using local strength in one area as leverage in their negotiations nationally."
To follow: The CC has also today published a Notice of possible remedies for consultation on measures which could improve competition.
