DAC Beachcroft Competition Expert Reacts To CMA Healthcare Market Investigation Report
Published 3 April 2014
The Competition and Markets Authority (CMA) has this week published its final report in the long-running investigation into the market for privately funded healthcare.
In its report, the CMA - successor to the Competition Commission (CC) - identified structural and non-structural features that, on their own and in combination with each other, could give rise to so-called 'adverse effects on competition' in the provision of privately-funded healthcare services in the UK.
Commenting on the report, Alexandra von Westernhagen, Head of the EU/Competition team at international law firm DAC Beachcroft, said: "The final report largely confirms the analysis and remedies proposed in the Provisional Decision on Remedies, although the change in divestment obligations will be the most eye-catching difference.
"In addition, the CMA has changed the scope of the information obligation imposed on private hospital operators in a number of ways. For example, while the £5m turnover threshold - below which no information obligations arise - was removed, the CMA has now specifically exempted facilities that provide consultation and treatment on an outpatient-only basis from having to provide data to the information organisation."
The structural features of the report include the existence of high barriers to entry and expansion for full-service hospitals, and weak competitive constraints in many local areas, including London. The CMA concluded these market features could lead to higher prices for self-pay patients in certain local markets, but also for insured patients for treatment by certain hospital operators, specifically HCA in respect of its provision of services in central London. The non-structural features included incentive schemes offered to consultants and a paucity of information, regarding hospital outcomes and consultant fees.
To remedy what the CMA describes as market distorting effects, the CMA has now recommended the following measures, which are largely in line with its Provisional Decision on Remedies:
- The divestiture by HCA of either the London Bridge and the Princess Grace hospitals or the Wellington hospital including the Wellington Hospital Platinum Medical Centre. In the Provisional Decision, the (then) CC considered that up to 9 hospitals, including seven owned/operated by BMI, would have to be divested. This has now been reduced;
- Measures to ensure that arrangements between NHS trusts and private hospital operators (to operate or manage a Private Patient Unit (PPU)) will be capable of review by the CMA. The CMA clarified that this remedy focused particularly on those arrangements that would otherwise fall outside the existing regime for conventional mergers under the Enterprise Act 2002. The exact test applied will be broadly similar to the "substantial lessening of competition" test used under the Enterprise Act 2002;
- A restriction or ban on certain benefits and incentive schemes provided by private hospital operators to clinicians. Any permitted incentives must, when they are offered to clinicians, now be disclosed on the hospital's website. Hospitals may still offer equity participation schemes to clinicians, but only where, among other things, the clinician pays a market rate for his stake and where this is not linked to any referral obligation;
- A combination of measures to improve the public availability of information on consultant fees and of information on the performance of consultants and private hospitals. The CMA will, to this end, require that private operators provide certain data for all patients treated at their facilities to an independent information organisation - the Private Healthcare Information Network (PHIN), which subject to certain governance conditions, has been provisionally earmarked for this role. The aim of this remedy is for the information organisation to publish the information on a website in a format that permits patients to search and compare results easily.
In response to the CMA's findings, HCA has announced that it will seek to appeal the report with the Competition Appeal Tribunal (CAT). If the CAT upholds an aspect of this appeal, this could lead to (part of) the investigation being remitted to the CMA for reconsideration. Any further appeals against a CAT judgment can, if allowed, go forward to the Court of Appeal or ultimately, to the Supreme Court.