PPUs – do the CMA investigation powers constrain new PPUs? A first decision under the jurisdiction

On 2 July the Competition and Markets Authority (CMA) published its first decision under its new jurisdiction created by the Private Healthcare Market Investigation Order 2014 in relation to the establishment of a new PPU.

08/07/2015

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David Owens

Partner

On 2 July the Competition and Markets Authority (CMA) published its first decision under its new jurisdiction created by the Private Healthcare Market Investigation Order 2014 in relation to the establishment of a new PPU.

The decision concerns the proposal by University Hospital South Manchester NHS FT (UHSM) to open a new PPU in conjunction with HCA. Under the 2014 Order the CMA has jurisdiction to review new PPU proposals to consider whether they have any impact on the adverse effects on competition. The  Market Investigation into the private healthcare market decided this may arise from the high barriers to entry and, at least in some places, weak competitive constraints.

The decision, which cleared the proposal, is interesting on two grounds.

First procedurally there is a 4 month time limit after material facts about the scheme become known to the CMA, in which the CMA must take a decision whether or not to conduct a formal review. In this case the CMA were initially told on 19 February and given more information on 2 March. It therefore concluded that it was only at the later date that it had sufficient information on which to base a decision whether or not to conduct a full review. Ity then took 3 months to arrive at its conclusion. This suggests that a degree of detail about the local market and potential impact on competition will be necessary just to get the clock running. The small redactions in the published decision indicate this may have included market share both in terms of bed capacity and income on the part of HCA, and information about the catchment area of UHSM.

Secondly, and of more general relevance to providers considering a new PPU, is the approach to assessing the need for a review. On the facts HCA had one other local facility at the Christie, which was, unsurprisingly, a specialist cancer facility; this meant they could legitimately argue that the degree of overlap with the proposed new facility was minor so that in individual markets there was unlikely to be significant consolidation of a position so as to raise barriers to entry. The extent of existing competition was also considered, and the presence of at least 2 and possibly more other private healthcare facilities in the catchment area of UHSM was taken as indicating significant other competitive constraints on the new facility, thus avoiding the need for a detailed review.

It does appear that the evidence accumulated to justify the decision was in fact quite wide ranging, and providers considering the need to engage with the CMA will need to be prepared to provide significant levels of information about market share as well as the scope of the local market, and competition in the local area. As this case concerned an out of London Trust, the CMA took the view that the potential market for the PPU was essentially the same as that for UHSM; this will not necessarily be the case in London.

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