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?