Clinician incentives – the ‘other’ impact of the private healthcare order

A flurry of activity in spring this year saw private hospitals adjusting to the reality of the Competition and Markets Authority’s Private Healthcare Market Investigation Order. As a result, consultants have been approached and asked to sign new agreements with the hospitals – the end result for many practitioners is an arrangement which looks quite different from what they have been used to over the years.  Here, we explain the changes and the need for compliance.

The long-running saga of the CMA’s investigation into private healthcare continues with appeal and counter-appeal by the affected parties.  Wider press attention has focussed on the Draconian requirement by the CMA that HCA should sell some of its London hospitals whilst private practice has understandably focussed on the publication of consultants’ fees and performance data.  Currently, the CMA is picking its way once again through insured pricing data with provisional findings due in August or September and a final report in January next year.

These appeals have somewhat detracted from the planned entry into force of the prohibition on clinician incentives.  The Order was published back in October 2014 but the part relating to ‘Referring Clinicians’ (Part 3) had a delayed entry into force until April 2015 to allow clinicians and hospital operators to make the necessary changes to their commercial arrangements.

What does the prohibition catch?

The prohibition makes unlawful any scheme or arrangement which is (or could be reasonably regarded as) an incentive between a referring clinician and a private hospital operator (“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 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.  (This is notwithstanding compliance with ethical and other professional standards as set by the GMC).  An obvious example is a payment made by a PHO to a consultant in relation to the number of patients referred to a hospital – but an allocation of shares in a PHO or a ‘contract for medical services’ between the two might not be so apparent.  Even parking spaces for senior consultants raise difficulties if they are not made available to all staff working at the hospital generally.

The CMA does however distinguish between two types of service provided to a clinician.  ‘Higher value services’ (secretarial and administrative support; use of consulting rooms; and contributions to professional indemnity insurance) are allowed, provided these are at ‘fair market value’.  For many consultants, the biggest impact so far is the requirement to pay for the use of consulting rooms and secretarial services which were previously free or at a discounted rate and therefore fall foul of the “fair market value” test.

‘Lower value services’ such as in-house training on clinical safety; operational matters relating to patient admission, administration and billing; and general marketing and corporate hospitality (within reason) are permitted.

The cost of higher and lower value services must be published on the hospital’s website (although not the identity of the consultant).

Equity participation in hospital groups

Part 3 of the Order also prohibits a clinician from having directly or indirectly a share or financial interest of over 5% in a PHO or in a facility owned or operated by a PHO; or in any partnership or venture with a PHO to offer private healthcare services; or in diagnostic equipment or equipment for treating patients.  Again, that wide definition can cover a number of scenarios and an ‘indirect interest’ includes interests held by members of a consultant’s immediate family or through a trust.


So to what extent do consultants need to comply? Put bluntly, the Order is law (competition law to be more precise) and breach of the prohibition could result in enforcement action by the CMA (such as financial penalties and injunctions) as well as other regulatory issues.  Private individuals are also permitted to bring proceedings if they believe they have been disadvantaged or otherwise adversely affected, suffering loss or damage.
It is essential that consultants are as well-informed about the need for compliance as the large hospital groups, particularly with continued attention on the independent sector by the competition authorities until at least the beginning of next year.
Competition law is a relatively complex area of law but the importance of gut reactions cannot be underestimated; a good rule of thumb is how an arrangement might appear to the outside world and how comfortable you would be to publicise it.

GMC Guidance

The GMC has produced Q&A guidance on the Order. It also intends to bring attention to the restrictions in the Order by writing to all licensed clinicians in the UK.