Two private hospital operators have been told by the Competition Commission that they must sell off nine hospitals between them in order to improve competition in the private healthcare market.

The regulator told HCA that it will be forced to sell two of its hospitals in central London, while BMI Healthcare has been given instructions to divest from seven of its hospitals, spread across Greater London, the Home Counties and the North West.

Further proposals announced by the commission yesterday include a ban on private hospitals using incentive schemes to encourage consultants to refer patients to their facilities.

The plans are based on an investigation carried out by the commission into the state of the market which found that many private hospitals face very little competition in certain geographical areas and that barriers to entry into the sector were high.

HCA have said that they will strongly contest the ruling, covering London Bridge Hospital and the Princess Grace Hospital, describing the recommendations as “plain wrong”.

Mike Neeb, the company’s chief executive, said: The [Competition Commission]’s own report acknowledges there are nearly 50 competitors in Greater London, our ownership of these hospitals encourages competition and drives a higher standard of care among hospitals in the UK.”

The competition watchdog also singled out incentive schemes created by private hospitals that encourage clinicians to refer their patients to private centres for particular treatments. This was found to be further compounded by a lack of information available to patients on the performance of hospitals and the fees paid to consultants.

The commission’s interim report, published last August, found that these factors meant higher prices for insured patients in many areas due to the fact that private hospital operators were able to use their market position in negotiations with private medical insurers.

Industry reaction to the proposals has been mixed, with Nuffield Health broadly welcoming them, while the Association of Independent Healthcare Organisations, an industry lobby group, labelled them unfair.  

Fiona Booth, the association’s chief executive, expressed concern that the regulator’s assessment of the market is flawed.

“We are disappointed that the remedies do not recognise the work of the sector in publishing quality and pricing data to help patients make informed choices about their care…many independent hospitals have built up strong partnerships with NHS institutions locally,” she said.

Competition Commission chairman Roger Whitcomb said: “Opening up this market to greater competition is not straightforward. Neither patients nor GPs have enough information, either on price or quality, to make informed decisions, and high costs and demand stagnation mean that new competing facilities are not going to spring up easily.

“In some areas, sales of hospitals to other operators will be effective in increasing rivalry but in areas with, for example, a single private hospital, a sale would just transfer market power from one operator to another.”

The regulator, which is set to become the Competition and Markets Authority in April, has also announced that it will in future review plans by private companies reaching agreements with NHS hospitals to operate private patient units if a firm already operates in that local area with little competition.