The healthcare enquiry found that the three large hospital group maintain a dominant position in terms of providing hospital services, which has served to reduce competition in the industry. It therefore recommended that a new supply side regulator be established to promote competition and pricing oversight. Although GCR believes that the establishment of such a regulator and the surrounding legislation will take between 12 – 24 months to implement, there is likely to be renewed reticence from current authorities to approve major new expansions or acquisitions for the large hospital groups. In addition, pricing will face greater scrutiny, which will likely have a dampening effect on margins.
Although GCR does not expect the findings of the Healthcare enquiry to present a material risk to the credit quality of the healthcare sector, the increased regulatory scrutiny is likely to have a negative impact on the already strained growth prospects for the large hospital groups in the domestic environment, as well as impeding pricing flexibility.