eu competition policy and healthcare services diane dawson corpus christi college cambridge based on...

EU competition policy and healthcare services

Diane Dawson

Corpus Christi College Cambridge

Based on forthcoming paper with Lyndsay Mountford

A diverse and uncertain package

• ECJ decisions (Articles 28 and 49) on free movement of patients (from 1998);

• Public procurement Directives (from 1992);

• EC Competition Law (Articles 81, 82 and Court judgements);

• Questions arising from Article 56 and free movement of capital;

• Draft Directive (2008) on patient rights in cross-border healthcare;

A surprise and a deep political concern

Until the Kholl and Decker decisions (1998) Europeans believeddelivery of health care was exempt from internal market rules.

A series of decisions over the next 10 years confirmed:

• Hospitals were “undertakings” (suggested in earlier decisions);• National insurers must reduce obstacles to patient movement;• Contracting must not discriminate against non-domestic producers;• Prices must not discriminate between EU patients;• Waiting times and treatment thresholds were flagged as issues.

EC Competition Law

• ECJ decisions (mainly Article 49) only dealt with cross-border issues;

• EC competition law embedded in UK competition law (Competition Act 1998) applies to behaviour within the UK;

• Only one case (Bettercare, abuse of dominant position);

• Apparently no cases in other European countries.

A damp squib?

The objective of the Articles on free movement is to encourageAn integrated and competitive market.

• Governments succeed in withdrawing healthcare from the Services Directive (2006);

• Movement of patients cross-border is very limited and unlikely to make much impact on competition (less than 1% of EU expenditure—mainly for emergency treatment);

• Direct investment potentially a much stronger force for competition.

The English Experience

In recent years England has actively promoted a more competitiveMarket in hospital services:

• A programme to invite (on very favourable terms) overseas direct investment in treatment centres (ISTCs);

• Opening the market for NHS patients to private sector hospitals.

• Expected to be 15% of the market for elective procedures

Very poor European response

• No European company bid in the first wave;

• One (Swedish) company bid in the second wave;

• Direct investment in new capacity (planned for 250,000 patients per annum) came from South Africa, Canada and the US.

When a market is opened response depends on company structure

• Established European suppliers of hospital services are small, local, usually independent, mainly not-for-profit, relatively no interest in overseas expansion;

• Non-European entrants were established commercial firms looking for increased markets.

• Some commentators see WTO as the relevant framework for market entry disputes rather than EU law.

Response of UK private sector to new market was rapid

• Private sector prices 40-100% above NHS costs;

• FT survey: UK consultants charge highest rates in developed world;

• End 2004, major private companies reduce prices to close to NHS prices;

• Private sector income from the NHS around 9% in 2003; anticipated 40% could come from the NHS by 2008.

Yardstick competition

DH is relying on yardstick competition to drive efficiency

• All NHS Trusts and private sector providers must trade at national tariff prices;

• National tariff based on average costs, by procedure, of NHS Trusts;

• Initially promised no Trust would be “bailed out” when unable to break even at national prices.

Article 56: free movement of capital

• A normal route for a new entrant is purchase of the assets of an established weak or insolvent firm;

• UK government promised English hospital market would be “contestable”;

• Impediments to competitive merger/takeover: (a) Legislation requires assets of a failing Trust be transferred to another DH organisation; (b) DH to determine allowable mergers;

• Four year delay producing an insolvency regime. Government to underwrite assets and prevent bankruptcy?

Meaning of “Capital movements”

• Establishment and extension of branches or new undertakings belonging solely to the person providing the capital and the acquisation in full of existing undertakings;

• Participation in new or existing undertakings with a view to establishing or maintaining lasting economic links.

Will existing and proposed English arrangements be challengedas impediments to free movement of capital?

Conclusions

• ECJ judgements on freedom of movement have had little effect on competition for hospital services or contributed to a more integrated health care market;

• EC and domestic competition law has been quiet;

• Is the hospital sector in Europe too politically sensitive for anyone to forward a competition agenda?

• EU and domestic regulators reluctant to act or potential plaintiffs too much to lose?