DH unveils licensing and competition plans

The 2012 Health Act allows the DH to set regulations giving the regulator the power to investigate and remedy anti-competitive behaviour by clinical commissioning groups or the NHS Commissioning Board.

A DH consultation on its proposed procurement and competition regulations, published yesterday, signalled its intention to confer these powers on Monitor, including “the power to direct a commissioner to remedy a breach of the regulations”, and “the power to direct a commissioner to withdraw or vary a tender for the provision of services”.

The regulator will only investigate breaches of rules on procurement, choice or conflict of interests where it receives a formal complaint, but it will have the power to investigate potential anti-competitive conduct “on its own initiative”.

“This will allow Monitor to address serious restrictive conduct in circumstances where interested parties are unwilling to make a formal complaint, for example because they fear damaging their relationships with local commissioners,” the consultation document says.

The proposed procurement and competition regulations are intended to adhere closely to the NHS’s existing Procurement Guide and Principles and Rules for Cooperation and Competition, but to place them on a statutory footing that can be enforced by the regulator.

The DH avoided listing specific behaviours that would be deemed anti-competitive in the regulations, opting instead for broadly defined prohibitions.

“We recognise that commissioners may want to have maximum certainty as to what is and is not permitted under the proposed requirements, but we have resisted taking a prescriptive approach because this would reduce flexibility for commissioners,” the consultation states.

Listing specific proscribed behaviours, such as imposing minimum waiting times, might lead commissioners to think “that the types of conduct listed were automatically prohibited irrespective of their effects,” it adds.

The department also yesterday began consultation on proposals for which NHS providers must hold a licence in the new system, and the scale of the fines Monitor can levy on providers that breach licence conditions.

Monitor will be able to fine providers up to 10 per cent of their turnover in England. However, the department said it intended to define turnover as only the provider’s NHS income. This definition would mean, for example, that the maximum fine Monitor could levy on a provider which earned three quarters of its income from private patients would be 2.5 per cent of turnover.

“We did consider a definition based on total turnover, but came to the conclusion that this was neither fair nor proportionate,” the consultation states. The “great majority” of licence holders who could be fined would have “significant NHS income”. It concluded: “In our view, this means that linking the 10 per cent maximum to NHS turnover will be both a significant deterrent for licence holders and a meaningful enforcement option for Monitor.”

On the scope of licencing, the consultation proposes to exempt providers from requiring a licence if they have an NHS turnover of less than £10m and fewer than 50 employees.

It concedes that a “de minimis” threshold of this kind “could result in providers seeking to avoid the licencing requirements, by reducing their NHS activity or redesigning business structures to avoid any legal entity exceeding the thresholds”.

But it states that a licence may also “act as a mark of quality with commissioners and patients”, and that the costs for providers close to the threshold of avoiding a licence are “likely to outweigh the costs of compliance with licence conditions”.