Hospitals could be sold under plans to tackle weak competition in the private healthcare sector.
The Competition Commission uncovered 101 private hospitals across the country which face little competition, driving up insurance premiums for patients in the £5.5 billion market.
It ruled almost 20 hospitals may have to be sold, and also signalled an end to doctors earning incentives for directing patients to particular private hospitals.
The regulator said the market dominance of the three biggest private hospital groups Spire, BMI and HCA had caused “consumer detriment” of £173 million to £193m a year between 2009 and 2011.
Smaller private hospital groups and insurers such as Bupa, Axa and Circle welcomed the measures but the larger hospital groups were defiant, insisting concerns over profits ignored the massive investment the firms had made in technology and patient care.
About 80% of private hospital patients are funded by insurance premiums, typically paid for by employers.
The regulator found new players rarely enter the private hospitals market due to high costs, the response from existing operators and flat demand.
The CC found the situation meant there were competition issues in many areas.
Chairman Roger Witcomb said: “The lack of competition in the healthcare market at a local level means that most private patients are paying more than they should either for private medical insurance or for self-funded treatment.
“The lack of available and comparable information, often less than is available to NHS patients, also makes informed choices which could help drive competition for these patients difficult.”
The Commission found HCA charged significantly higher prices to insurers than other operators, with BMI the next most expensive for insurers.
Under the CC proposals, operators will also be prevented from using their dominance in a local area as leverage in negotiations with insurers.
Private hospitals could also be barred from further tie-ups with NHS hospitals in areas where there is little competition and will be forced to give more information on quality, fees and services. The watchdog did not pinpoint where hospitals will have to be sold, except in London.
The Commission released its provisional findings after starting its probe in April last year, when the Office of Fair Trading referred the sector for investigation.
Damien Marmion, managing director of Bupa Health Funding, said the measures “could be the treatment required to drive better value, better quality and greater transparency for customers”.
However, BMI chief executive Stephen Collier insisted profits were reinvested back into its hospitals.