Insurer Bupa warns of ‘affordability crunch’ in private hospitals

By PETER CRIPSS AND PETER RANSCOMBE
Published on 08/08/2012 09:17

Healthcare insurer Bupa has warned that a lack of competition between private hospitals is pushing up the cost of treatment and is threatening to make its policy unaffordable.

As the cost of paying for its customers’ private treatment continues to rise, the firm has warned that the health insurance industry faces a looming “affordability crunch” in the medium-term.

Bupa said it is negotiating hard with hospitals to try to keep prices down, but the rising costs, coupled with the weak economic environment, contributed to a 5 per cent fall in customer numbers at its UK insurance division to 2.7 million in the six months to 30 June.

Bupa’s Europe and North America business saw profits fall 22 per cent to £35 million in the half-year as the higher fees pushed up the cost of claims.

The Competition Commission is currently investigating the £5 billion private healthcare sector, which it said is dominated by five players, with some parts of the country only having one private hospital. Bupa has called for “structural changes” to the market.

Meanwhile its healthcare division, which has nearly 18,000 residents in 300 homes, saw profits squeezed as local authority fees failed to increase at the rate of inflation, echoing the funding squeeze which led to the demise of Southern Cross.

But overall revenues rose 5 per cent to £4.1bn, with underlying profits up 3 per cent to £254.7m and driven by strong growth in international markets such as Hong Kong.