CMA U-turn on hospital divestment

In its 22 March provisional findings the CMA has said that it will not require Hospital Corporation of America (HCA) to sell off hospital assets as remedy in its private healthcare market investigation.  The provisional remedies have been put forward by the CMA in what is its second review of the private healthcare market.  A partial further review was triggered after the Competition Appeal Tribunal (CAT) found errors in the CMA’s insured pricing analysis back in November 2014.

Now the CMA has retreated from its original demand for a divestiture remedy.  In April 2014 the CMA said that HCA needed to divest either the London Bridge and Princess Grace hospitals or its Wellington Hospital.

The CMA has provisionally concluded that while it has found that HCA charges higher prices than the London Clinic it cannot confirm that the price difference is due to weak competition.  The CMA also has doubts whether it has properly controlled for differences in the patient mix between the respective hospitals.

The CMA’s moderation of its original findings and remedies shows that it is willing to revisit its predecessor’s work and take into account new evidence.  In particular, it expects that the likely entry of the Cleveland Clinic when coupled with competition from existing operators will constrain market power.  In the circumstances, the CMA did not consider that the likely short-lived benefits of a divestment would be sufficient to justify the cost.

Although the findings are provisional it is difficult to contemplate that the CMA would change tack again by reinstating a divestment remedy in its final findings.  While it is to the CMA’s credit that it has the intellectual agility to change its mind, this development has come after substantial public and private resources have been expended both through the CMA and the Competition Commission procedures and before the CAT.  One wonders whether the time, effort and money might have been better deployed towards hardcore competition law enforcement or improvements in healthcare.