10 January 2019
Dr Mary Guy’s new monograph, Competition Policy in Healthcare – Frontiers in Insurance-Based and Taxation-Funded Systems, is published by Intersentia on 11 January 2019. Here she previews some of the book’s discussions following the recent introduction of the NHS Long Term Plan.

The NHS Long Term Plan includes a proposal by NHS England to “remove the counterproductive effect that general competition rules and powers can have on the integration of NHS care”. This is the latest in a long line of calls to reform the contentious competition policy emerging from the Health and Social Care Act 2012 (HSCA 2012), following recommendations by select committees of both the House of Lords and the House of Commons. In particular, NHS England proposes to remove Competition and Markets Authority (CMA) duties to intervene in NHS provider mergers, as well as its powers regarding the NHS tariff and NHS provider licence condition decisions. However, NHS England also recommends removing NHS Improvement’s competition functions so that it can focus fully on developing and overseeing NHS providers. In Competition Policy in Healthcare I examine the HSCA 2012 competition reforms of the English NHS in light of the Dutch experience of developing competition in healthcare. This blog post previews some of the book’s discussions in connection with the aforementioned NHS Long Term Plan proposal.

CMA oversight of the NHS under the HSCA 2012 (Chapters 1-3)
Prior to the HSCA 2012 reforms, the Secretary of State for Health and the Department of Health oversaw the NHS, and the competition authority oversaw the private healthcare sector. The HSCA 2012 changed this by introducing new agencies – NHS England and NHS Improvement (formerly Monitor) – to reduce day-to-day Secretary of State intervention in the NHS. In addition, the CMA was granted two types of intervention power.

Firstly, assessment functions regarding the application of competition law and conducting market investigations, which assess whether competition is working effectively in a given market. These assessment functions were granted as “concurrent powers” with NHS Improvement, meaning, broadly, that either agency may take enforcement action. However, ongoing controversy surrounding the HSCA 2012 reforms led to NHS Improvement having sole competence to investigate cases involving provision of healthcare services for the purposes of the NHS. Secondly, review functions regarding the setting of prices for the National Tariff, and regarding NHS Provider Licence conditions. Although these appear not to have been used, they nevertheless mark decisive shifts in the NHS regulatory landscape. The National Tariff was formerly overseen by the Department of Health, but is now managed by NHS Improvement and NHS England. The NHS Provider Licence was a new development amongst the HSCA 2012 reforms with the effect that providers (private, voluntary sector and NHS) wishing to deliver services for the NHS require a licence to do so.

NHS Provider Mergers and the HSCA 2012 (Chapter 4)
S.79 provides for a test to be applied to mergers between two or more NHS Foundation Trusts, involving NHS Foundation Trusts and NHS Trusts, or NHS Foundation Trusts and private entities. The decision of whether to approve or block a merger lies with the CMA, but NHS Improvement has an important advisory function to help the merging parties identify “relevant patient benefits” which can offset competition concerns. These are defined in statute as relating to lower prices and higher quality, but in practice have been related to wider NHS policy development, such as Sustainability and Transformation Plans (STPs). A result of this is increasing approval of mergers involving NHS Foundation Trusts, when it might be expected that some mergers would be blocked. This is curious because competition is fundamentally at odds with the current focus on integration in the NHS. This was even recognised explicitly by the CMA in the 2017 Manchester Hospitals merger:

“Competition in the NHS is only one of a number of factors which influence the quality of services for patients and we have found in this inquiry that it is not the basic organising principle for the provision of NHS services.”[1]

However, the HSCA 2012 merger assessment regime appears not to apply to all mergers which have implications for the NHS: a merger involving two private providers appears to be subject to the general merger test with no requirement to identify “relevant patient benefits”. Nevertheless, NHS England is right to distinguish between the CMA’s role in HSCA 2012 merger assessment and its investigations of anticompetitive behaviour by pharmaceutical companies in supplying the NHS – this latter is arguably a better focus for competition policy with regard to the NHS.

NHS Improvement’s competition functions (Chapters 1-4)
As noted above, NHS Improvement shares “concurrent powers” with the CMA regarding competition law cases involving the provision of healthcare for the NHS (as distinct from the private healthcare sector) and market investigations of the NHS. “Concurrent powers” are a feature of the UK economic regulation landscape and govern relationships between the CMA and sectoral regulators such as OFCOM and OFGEM. This style of relationship, and the vision for the NHS Provider Licence (also overseen by NHS Improvement), were set out in the White Paper preceding the HSCA 2012, effectively articulating a vision of competition for the NHS which mirrored the 1980s liberalisation of utilities. A combination of the complex interaction between the NHS and private healthcare sector and controversy surrounding the HSCA 2012 reforms has demonstrated that this model of competition cannot simply be transposed to the NHS.

Perhaps the most notable of NHS Improvement’s competition functions can be found in the National Health Service (Procurement, Patient Choice and Competition) Regulations (No.2) 2013. These appear designed to regulate the behaviour of NHS commissioners (purchasers) and, together with the Choice and Competition condition of the NHS Provider Licence, comprise an “NHS-specific” competition regime, which borrows heavily from the terminology of EU competition law with little consideration for practical implementation in the NHS context. What the 2013 Regulations add to general competition law in particular remains unclear, and only a few cases have been examined in connection with procurement and patient choice.

“Possible legislative change”
Shortly after the HSCA 2012 was enacted, it was suggested that a major effect would be the “juridification” of what had previously been matters of public policy, notably the expansion of private sector delivery of NHS services.[2] Indeed a major part of the problem with the HSCA 2012 competition reforms is surely the lack of flexibility which arises from enshrining policy in legislation. What has been missing is serious examination of the various exceptions to competition law and merger control to counteract this lack of flexibility. Attempts to explore exception mechanisms (such as classifying specific activities as Services of General Economic Interest) have proved short-lived,[3] or were simply lacking from the development of the HSCA 2012.

It is therefore to be welcomed that NHS England’s proposal is linked with “possible legislative change” rather than an ongoing series of convoluted workarounds.

Dr Guy has also written about the comparative analysis of the book, in a post for the British Association of Comparative Law (BACL).

[1] CMA, Central Manchester University Hospitals and University Hospital of South Manchester, Final Report, 1 August 2017. Page 5, paragraph 7.

[2] A.C.L. Davies, ‘This Time, It’s for Real’ (2013) 76(3) Modern Law Review 564.

[3] For example, The National Health Service (Amended Duties and Powers) Bill (HC Bill 18 2014 – 15) was tabled by the Labour MP Clive Efford and received significant support on its second reading in November 2014 (241 Ayes, 18 Noes). It was eventually abandoned at Committee stage in March 2015 following protracted and circular discussions of the concept of ‘solidarity’, led by the Conservative MP Jacob Rees-Mogg.