Beware of becoming a cartel
First published in Independent Practitioner Today in September 2020
In the wake of Spire’s £1.2m fine by the Competition and Markets Authority, Michael Rourke draws attention to the competition law implications for independent practitioners.
A recent significant fine levied by the Competition and Markets Authority brings the need to avoid anti-competitive practices in the Healthcare sector into sharp focus.
If you work as a medical practitioner, you will be used to the potential of oversight investigation from a number of potential regulators. However, the announcement by the Competition and Markets Authority (CMA) of a £1.2 million fine on Spire Healthcare Limited and Spire Healthcare Group plc (Spire) is a reminder to the sector that it is not just health regulators that can bring enforcement action. The CMA is concerned with upholding competition law in the UK and there are a number of rules which apply to healthcare, just as with any other sector of the economy.
Whilst this is the second fine imposed by the CMA on ophthalmologists, investigations and sanctions against private practitioners remain a rare occurrence. The majority of CMA investigations, reviews and sanctions have been concerned with the pharmaceutical sector. However, this recent case shows that the CMA can, and will, investigate private providers, and individual practitioners. It was not only Spire that received a fine, six individual ophthalmologists also received personal penalties.
For those who have been in private practice for a number of years, you may remember the long running (and contentious) CMA investigation into the private healthcare. The investigation eventually led to the Private Healthcare Market Investigation Order 2014 (the Order) which eventually fully came into force after a number of appeals to the courts. This Order lead to a number of changes in the operation of the commercial arrangements in the private healthcare sector.
The Order introduced a prohibition on incentives being paid to clinicians for referring patients to the private hospital operator (PHO). The Order makes unlawful any scheme or arrangement which is (or could be reasonably regarded as) an incentive between a referring clinician and PHO to induce a clinician to refer a patient for treatment or tests at a facility within the PHO group. The prohibition applies both to the clinician and the PHO, so the legal obligation to comply is on both sides.
It is deliberately widely drafted so as to catch any arrangement, whether legally enforceable or not, which might be seen to affect the choices consultants make (or suggest to their patients) about further treatment including diagnostic tests. An example of the ban was the disappearance of any reward schemes made by a PHO to consultants in relation to the number of patients referred to a hospital.
This restriction means that PHOs have to charge clinicians for the services that are provided to them at fair market rates. Whilst the provision of a number of services (such as training, tea and coffee, general marketing etc) are exempted, other high value services (charges for consulting rooms and secretarial services for example) are caught. Where low value services are provided, details of these must be published.
Another important aspect of the Order for private practitioners was the new limitations on whether directly or indirectly (including held by close family members) they may own shares or have a financial interest in a PHO or in a facility owned or operated by a PHO in which they hold practising privileges; or in any partnership or venture with a PHO to offer private healthcare services or in diagnostic equipment or equipment for treating patients. There are exemptions for this based on the date of ownership, for general practice and on small shareholding of 5% or less. However, even with the smaller shareholdings there remain a number of additional rules to be followed.
The Order also sought to remedy what the CMA determined was a lack of information about private healthcare and private treatment fees available to the public. The Private Healthcare Information Network (PHIN) began publishing the fees of over 4,500 UK consultants on its website last year. The CMA Order requires that all consultants providing services to private patients should submit their self-pay patient fees for consultations and procedures to PHIN, particularly those consultants who admit patients for procedures on a day case or inpatient basis.
This requirement for fee transparency has led some to question the sanctions imposed on Spire and the practitioners. However, this growing requirement for price transparency does not authorise the setting or fixing of prices by practitioners. The intention of price transparency brought about through the Order is to drive down prices through open competition. The recent fine was imposed due to practitioners agreeing over dinner to fix a minimum fee, and then the Spire helping this to be implemented.
Whilst competition law does not prohibit all collaboration or information sharing by private providers, there are a number of key restrictions. These are broadly:
- Coordinating to keep prices at a certain minimum level
- Agreeing a fixed price or a mechanism for setting prices
- Agreeing to share or divide markets (such as particular places) or patients between you and your competitors
- Agreeing future commercial plans
A number of questions have been raised by consultants confused about how the Spire decision sits comfortably with insurance companies offering a set a maximum fee that they will pay to practitioners for procedures. These rates effectively set the price for a procedure for insurance covered patients. Insurance companies are subject to the same competition law requirements as practitioners. The CMA and the Financial Conduct Authority (FCA) have concurrent functions to enforce competition law infringements in the financial services. If evidence over collusion between insurers over fees payable to consultants were to be established, enforcement action by the CMA and others would almost certainly follow.
Practitioners can choose to agree to the terms offered by the insurers, or to refuse these and accept only self-pay clients or inclusion on the lists of potentially higher paying insurance companies. However, whilst it is an infringement of competition law for practitioners to seek to agree minimum prices for self-pay patients, it has never been held to be an infringement for hospitals to offer fixed packages of care to patients with set rates for consultants, or for insurers to offer fixed sums to consultants. In practice, the competition between hospitals and insurers are in the prices they charge to the patients, not the sums they pay to consultants. The competition between independent consultants is the charge to the patients themselves.
The CMA is committed to tackling features of the markets for privately funded healthcare services that have an adverse effect on competition. Here are some potential pitfalls to avoid;
- Don’t discuss your specific self-pay-rate rates with other independent providers with a view to establishing a common price. There may be a temptation to connect with others, particularly on social media to set rates and to advise each other of what rates to charge. This does make it tricky for practitioners to know what the going rate is and how they should set their rates in order to be competitive, however the intention for PHIN to publish such data in future will mean this should be more available than perhaps previously. Remember you can break the law if you have an informal agreement over prices.
- Be mindful not to seek to divide up the areas of work with other practitioners. You cannot agree with others to only work in certain areas for example, in order to increase your fees. This is particularly important for those working in much sought after specialties.
- Don’t engage in arrangements that induce you to refer private patients to, or treat private patients at, the facilities of a particular private hospital operator.