Healthcare Business News

HCA required to divest two London facilities amid scrutiny of private hospital market

By Beth Kutscher
Posted: April 2, 2014 - 1:15 pm ET

Antitrust regulators in the U.K. will require HCA to divest two of its hospitals in central London.

The recommendation follows a two-year investigation of the private hospital market conducted by the Competition and Markets Authority. In a final report released Wednesday, the CMA argued that HCA owns more than half of the available beds in central London and charges significantly higher prices than its competitors.

Nashville-based HCA, the largest hospital chain in the U.S. by revenue, operates six private facilities in the U.K. The call for it to divest “would punish healthcare innovation and is not in the best interests of patients,” HCA said in a release, adding that it plans to fight the proposal.

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HCA would have to divest its London Bridge hospital, and either its Princess Grace or Wellington hospital under the recommendation. The disposal will increase competition in a market with high barriers to entry and a long lead time to building new facilities, the CMA said.

However, it added that it could not find a clear link between weak competition and higher prices in markets outside of central London.

HCA International said it purchased the hospitals a decade ago when they were not considered viable and made significant investments to transform them into world-class centers for cardiac and cancer care.

“The CMA has treated the highly complex healthcare system as a commodity market, focusing almost exclusively on price and overlooking the importance of quality,” Mike Neeb, CEO of HCA International, said in a statement. “In failing to consider our investment, the mix of patients we treat and the complex procedures we carry, the CMA has drawn inaccurate conclusions about HCA International's pricing—something we strongly refute and will of course be challenging.”

The news barely touched HCA's share price, with analyst Frank Morgan of RBC Capital Markets pointing out in a note to clients that the litigation is likely to be protracted. The three London facilities account for just over 3% of the company's total revenue, he added.

The CMA also moved to restrict certain incentive programs that encourage clinicians to refer patients to particular providers for tests and treatments. These referrals are being made for reasons other than price and quality considerations, it found.

The issue of competition among healthcare providers also has been one of the top priorities for the Federal Trade Commission in the U.S., which has closely scrutinized—and successfully blocked—mergers in a number of high-profile cases.

Follow Beth Kutscher on Twitter: @MHbkutscher

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