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CMA dispenses final remedies for private healthcare market

Stethoscope and pen on top of a medical report Print publication

03/04/2014

Background

The background to yesterday’s announcement is described in our earlier article, Healthy Competition. It is the culmination of a two-year investigation by the Competition Commission (CC) (which became the Competition and Markets Authority (CMA) from 1 April 2014) into the private healthcare market. Provisional findings were published in August 2013 and the CC published its provisional decision on the remedies it proposed in January 2014.

Final remedies

The final report implements all the remedies that were proposed in January, with one key exception. The CC had proposed that HCA would have to sell two of its six London hospitals and BMI would have to sell seven of its hospitals across England. The final report found that whilst it was clear that HCA’s market power in central London allows it to charge higher prices to insurers, outside central London the effect of weak competition on prices charged nationally to insurers is less clear. Therefore, the CMA has dropped the requirement on BMI to sell its hospitals.

The remedies in summary are:

  • HCA must divest either the London Bridge and Princess Grace hospitals or the Wellington hospital including the Wellington Hospital Platinum Medical Centre
  • Measures to enable the CMA to review any private patient unit (PPU) arrangements and prohibit them if they will significantly lessen competition in the relevant local area
  • Prohibiting or restricting clinician benefits and incentive schemes that encourage clinicians (including consultants) to refer patients to particular private hospitals
  • Publishing information on private hospital and consultant performance, to make it easier for patients, insurers, GPs and consultants to assess a private healthcare facility or a consultant’s suitability in terms of quality and price
  • As a condition of practising at private hospital facilities, all consultants will have to provide fee information to patients in a standard prescribed format

Comment on structural remedies

Unsurprisingly, HCA has reacted angrily to the news that it will have to sell off a third of its London hospitals whilst its rival BMI does not have to sell any. It has vowed to “vigorously challenge” the decision in the Competition Appeal Tribunal. BMI, on the other hand, welcomed what it called “a sensible, measured and fair conclusion”. The CMA comments that it thought carefully about how to balance the benefits against the cost of the final package of remedies whilst coming up with “as comprehensive a solution as is reasonable and practicable for the adverse effects on competition and resulting consumer detriment that we found.”

The Competition Appeal Tribunal has the power to review decisions of the CMA in market investigations only on the limited grounds of judicial review. The Tribunal may consider, for instance, the proportionality of remedies imposed by the CMA and may in certain circumstances refer the matter back to the CMA for further analysis.

Of wider significance are the measures enabling the CMA to review PPU arrangements. There will be no obligation to notify these but where the CMA has concerns about arrangements between NHS Trusts and private hospital operators to operate or manage a PPU, they can be called in for review. The CMA will prohibit arrangements which (according to a test set out by the CMA) significantly lessen competition in the relevant local area or the CMA may “in exceptional circumstances” take other steps, such as accepting undertakings from the parties. We anticipate that such reviews will often be triggered by complaints from third party providers struggling to enter or expand in areas with entrenched incumbent suppliers / where local competition is weak.

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