The British United Provident Association Ltd and HCA United Kingdom Ltd: A report on the merger situation

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On 21 November 1989 the Secretary of State for Trade and Industry asked the MMC (Appendix 1.1) to investigate and report on the acquisition by The British United Provident Association Ltd (BUPA) of HCA United Kingdom Ltd (HCA).

BUPA is the largest health insurer in the United Kingdom, with some 52 per cent of the value of health insurance premiums in 1988. It also owns 18 private acute hospitals (excluding those acquired from HCA), some 9 per cent of the total, and is the second largest private hospital group in the United Kingdom. HCA with ten hospitals, some 5 per cent of the total, was before the merger the fourth largest private hospital group in the United Kingdom.

As a result of the merger, BUPA has about 14 per cent of private acute hospitals and private beds. We do not expect that this increase in market share would significantly reduce competition or choice, on a national or local basis.

The main concerns about the merger arise from the vertical integration between BUPA Insurance and the expanded activities of BUPA Hospitals. It was, for example, argued to us that BUPA would divert its subscribers to its own hospitals, or threaten to do so in order to secure lower charges from other private hospitals, to the detriment of its competitors. It was also put to us that the increase in BUPA's share of the private hospital market would affect the competitiveness of other health insurers.

BUPA's share of the health insurance market puts it in a strong negotiating position which enables it to secure lower charges from private hospitals than other insurers. Given, however, BUPA's limited share of the private hospital market, the small increase in that share as a result of the merger, and its current policy and present intention of operating its insurance and hospitals businesses on an arm's length basis, we do not believe that the merger will significantly reduce competition in either the health insurance or private hospital markets.

If, however, BUPA were to change its policy of operating the two businesses on an arm's length basis, or use its position to the detriment of its competitors, or increase its share of private hospitals by more than it currently intends, further examination of the position by the Director General of Fair Trading might be required.

We have therefore concluded that the merger may be expected not to operate against the public interest.

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