We have previously reported on the Competition Commission's investigations into the private health market and the provisional findings published in August last year which identified features of the markets for the supply of private healthcare services that resulted in an adverse effect on competition. Click here to view.

On 16 January 2014 the Competition Commission published its provisional decision on the remedies required to address the adverse effects on competition identified in the provisional findings.

The package of remedies put forward includes contentious mechanisms, such as the divestiture of BMI and HCA private hospitals and prohibitions on clinician incentive schemes, which will have an obvious and dramatic impact on the private healthcare market.  These measures look set to be strongly contested by private providers. 

Of most direct significance to public sector healthcare providers is the Competition Commission's proposed Private Patient Unit (PPU) remedy.  This remedy gives the Office of Fair Trading or the Competition and Markets Authority the power to prohibit an existing private hospital operator from acquiring the right to manage a local PPU and could have a significant impact on how NHS Trusts and NHS Foundation Trusts procure PPU partners in the future.

Background

In its provisional findings, the Competition Commission reached two key conclusions which made PPUs a focal point: that PPU outsourcing was a growth area, particularly with the Health and Social Care Act 2012 lifting the cap on NHS Trust income from private patient activity; and that PPUs generally benefit from co-location in NHS facilities which means that partnering with an NHS Trust to manage a PPU could offer private hospital operators a low-risk means of market entry.

The Competition Commission was concerned that the opportunity to reduce market concentration afforded by PPU partnering would not be realised as new entrants to the market and small operators would be prevented from entering into partnerships with NHS Trusts to manage PPUs because existing private hospital operators facing weak competitive constraints would get there first. 

Proposed remedy

The PPU remedy is intended as a 'market opening measure' which will increase competitive constraints on existing private hospital operators.   It will function on a case by case basis and will supplement, rather than replace, the existing UK or EU merger regimes.  Arrangements between NHS Trusts and private hospital operators for the operation of a PPU would need to be notified to the Office of Fair Trading (OFT)/ Competition and Markets Authority ("CMA") for review on their merits. The OFT/CMA would prohibit those arrangements which were expected to result in a substantial lessening of competition in any market. 

Issues

The concern with the PPU remedy is that it could curtail the freedom NHS Trusts currently have both to identify providers who are willing to invest in the PPU projects and to cultivate partnerships with those providers which have the right experience and expertise. 

Next steps

Interested parties have until 5pm on 6 February 2014 to provide their views on the provisional decision on remedies.

The Competition Commission is due to publish its final decision on the adverse effects on competition and the appropriate remedies on 3 April 2014.