Competition rises in private wards

Growing competition between private hospitals and the NHS lies behind yesterday's furious dispute over Bupa's move to restrict its private subscribers to using chiefly private hospitals.

Since 1990, the NHS has reversed a historic decline in its share of the private patient market, with a rapid expansion in NHS private units seeing it take 16 per cent of the business last year against 11 per cent five years ago. Next year, independent analysts predict, it may take 20 per cent, making the NHS the biggest single provider of private care.

The expansion has come at the expense of the big private hospital groups - including Bupa itself - with occupancy across all private hospitals running at only 50 to 60 per cent, industry analysts said yesterday.

Bupa has also launched a novel Health Fund, aimed at restoring its declining share of the private insurance market. It offers those who switch to it "credits" that can be used towards a wide range of other health products from critical illness cover to disability income.

The price is a more restricted choice of hospitals for private treatment - down to 150 private-only hospitals against the 800-or-so, including NHS trusts, which provide at least some private-patient facilities.

Bupa yesterday argued this represented little change as more than 80 per cent of its subscribers already use the private sector rather than NHS pay-beds.

But Tim Baker, Norwich Union's commercial manager, accused Bupa - whose main board includes Sir Duncan Nichol, the former NHS chief executive - of reducing "choice and diversity" for its clients and of acting to protect its hospital interests from NHS competition. "There are big consumer disadvantages here," he said. Many private hospitals could not cope with a lot of the more complex work, he said. Patients might have to travel from Norwich to London, for example, to find a private hospital.

Norwich Union would continue to use NHS pay-beds, as "they are often more cost-effective because they are able to share services with NHS hospitals. We want to encourage NHS pay-beds in order to encourage diversity and choice."

PPP, the second largest insurer, also said: "We have no plans to exclude NHS pay-beds from our cover. In many respects, the NHS is the provider of choice for our customers and we have plans to build on that relationship in future."

Industry estimates varied over how serious the impact of Bupa's move would be on NHS services, some suggesting that the NHS Trust Federation was overstating it. Bupa itself said it would depend on how many of its subscribers switched to its new scheme. Even if all 550,000 subscribers did so, only pounds 16m at most of the NHS pay-bed business of approaching pounds 250m would be affected, Bupa argued.

Marco Cereste, the NHS Trust Federation chairman, said: "We are not just going to allow this to happen ... For Bupa to have a preferred provider arrangement which excludes the NHS is ridiculous when if something does go wrong in a private hospital the patient will end up in the NHS any way."