Competition law in the NHS

The application of competition law to the UK's NHS organisations was clarified by the Health and Social Care Act 2012 (HASCA). Whilst it was heavily criticised by the NHS community as an instrument for privatising the NHS and opening the provision of public healthcare to private sector providers, the Conservative's general election win means that HASCA is here to stay.

This short article provides a snapshot of the application of competition law to the NHS to help providers understand the implications of the competition law regime.

Market mechanisms to improve hospital quality

Competition in the NHS is focussed on care quality because NHS services in the UK are free at the point of delivery to the patient. The current regime is a reflection of the view that competition and patient choice are seen as intrinsic drivers to improving quality in the NHS.

In the 1990s, funding and provision of NHS services were split to create an internal market. Ten years later, a “payment by results” system incentivised hospitals to innovate and improve efficiency. In recent years, financially autonomous foundation trusts were created to allow hospitals to invest surpluses. This fuelled competition between them to improve quality in order to win more contracts from commissioners. Most recently, New Labour’s introduction of patients’ right to choose a hospital for elective services gave birth to a new aspect of competition where hospitals are able to compete for patients directly.

Application of competition law to NHS services

The HASCA clarified that providers of NHS services, i.e. NHS Trusts and Foundation Trusts, are subject to the Competition Act 1998 (CA98) and the merger control and market investigation framework contained in the Enterprise Act 2002 (EA02).

The HASCA granted Monitor, the healthcare regulator, concurrent investigatory and enforcement powers with the Competition and Markets Authority (CMA) when dealing with anti-competitive behaviour and carrying out market investigations. As noted in the CMA's 2015 Annual Report on Concurrency, one of Monitor's duties is to ensure that "procurement, choice and competition operate in the best interests of patients". This is in addition to Monitor's regulatory role. In contrast with other concurrent regulators, Monitor does not have a role promoting competition.

Merger control

The CMA is responsible for undertaking merger reviews under EA02 but Monitor has a role in advising the CMA on the relevant patient benefits arising. Since 2013, the CMA has investigated four mergers involving solely NHS organisations. The CMA found competition concerns arose in two of the cases.

In particular, the Bournemouth/Poole[1] merger was blocked after a Phase 2 (in-depth). In contrast, Wrexham/ Frimley Park was a Phase 1 clearance. Nelson Jung, Director of Mergers, credited the swift investigation to the "constructive discussions with the hospitals prior to their formal notification of the proposal, along with the close cooperation between the CMA and Monitor"[2].

Currently, Royal Surrey/Ashford and St Peter's[3] is under Phase 2 investigation as "the CMA has found that in several elective specialty services the merger could significantly reduce quality for patients by removing the incentives that currently exist for the trusts to attract patient referrals from each other. "[4]  It is perhaps a little surprising that, given the prior cases and the cost involved of Phase 2 reviews, a deal is proposed where there are material issues.

Note, mergers relating to Private Patient Units (PPUs) are also potentially caught under UK merger control laws.

Anti-competitive behaviour

To date, the CMA and Monitor have not investigated any NHS body for anti-competitive behaviour under CA98. This does not mean that the HASCA is ineffective or that anti-competitive behaviour does not exist in NHS organisations. This is perhaps not surprising due to the possible relative lack of familiarity with competition law concepts by NHS organisations resulting in to fewer complaints and regulators allocating resources to more harmful practices in other markets.

Monitor has taken regulatory actions relating to the commissioning of services e.g. radiosurgery services in Yorkshire and Humber and elective services in Blackpool and Fylde & Wyre, as part of its statutory duty in enforcing the rules on procurement and patient choice.

Conclusion

Since the introduction of HASCA, regulators and NHS organisations are still feeling their way through the new regulatory landscape.

The current government is a staunch supporter of competition law in the NHS and, without a doubt, competition law is here to stay. Private healthcare providers need to be aware of the recent changes and new obligations on NHS organisations in order to be sensitive to their needs, challenges - and behaviour.