Why competition still has its place in NHS

There have been some misunderstandings in the Health Bill debate on the role of competition law in the NHS. The NHS Future Forum paper on choice and competition, Delivering Real Choice, now provides a lucid evidence-based overview of this complex area. It also offers a platform for moving the bill forward and has largely been endorsed by the government’s response.

This article sets out a few clarifications on competition law to help inform the ongoing debate.

First, competition law already applies to the NHS wherever there is competition between “undertakings”. This is because the two main competition law prohibitions – on anti-competitive agreements and abuse of dominance – only apply to “undertakings”. Foundation trusts, social enterprises, private providers, GP partnerships and even NHS consultants are all undertakings, but only in relation to those activities (or “markets”) where they compete.

In relation to NHS services, this is for a minority of services - including certain diagnostic and elective services and primary care. As patient choice of provider is increased and the NHS looks to the private sector for innovation and investment, the reach of competition law in the NHS will increase.

Second, we need competition law. History shows us that economic operators will frustrate competition by collaborating to exploit consumers (here, the taxpayer and patient) or exclude competitors. Even without price competition, there are many other ways of restricting competition in the NHS – the Cooperation and Competition panel has already identified some of these. For example, trusts requiring their consultants not to use non-contracted hours to work for private providers in relation to NHS activity.

Competition law is designed to tackle anti-competitive conduct and determine where collaboration (or “integration”) is permissible (when it produces benefits which are passed to consumers) and where it is not. This then allows competition to work properly. And the benefits of competition in terms of quality, choice and efficiency have been recognised by the NHS Future Forum; at least in relation to less specialised services.

Third, giving Monitor the power to enforce competition law will not increase the reach of competition law, though it may mean that bad practices which currently go unchecked will be deterred in the future. The benefits of a specialist competition authority are acknowledged by the NHS Future Forum and endorsed by the government’s response. The enforcement tools available under competition law include fines of up to 10 per cent of the undertaking’s turnover. So these tools need to be in the hands of an authority which understands the unique challenges of the NHS.

Fourth, public procurement law is different. These European Union rules are applicable to government bodies, such as the Department of Health and NHS commissioners. They are designed to ensure that preference is not shown to national companies in government purchasing.

Only a very light touch regime applies under public procurement law to clinical services tenders, and the obligation to conduct an advertised tender will only apply where the contract is sufficiently large to attract bidders from other EU member states. Procurement law does not require all healthcare services contracts to be put out to tender. The NHS Future Forum rightly points to the bureaucratic inefficiency of an “over-zealous” adherence to EU procurement process. The call for guidance from the NHS Commissioning Board to ensure simple, proportionate procurement practice is welcome and consistent with procurement law. 

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Finally, concerns have been raised that the bill requires Monitor to promote competition at the expense of patients and that this will lead to “cherry picking” and undermine the viability of essential services. Under the bill, the primary duty is actually already to protect and promote patient interests and promoting competition is a means to achieve this “where appropriate”.

This may explain the government’s ambiguous proposal to remove Monitor’s powers to promote competition “as if it were an end in itself”. The promotion of competition may remain in some form.    

The key NHS Future Forum proposal that appears to have been endorsed is that the NHS Commissioning Board, rather than Monitor, will determine the model of choice and competition (that is, the pace of liberalisation). Monitor will not be called an economic regulator – and will presumably not set tariffs. Both the NHS Commissioning Board and Monitor will combat cherry picking. But it is the board which is likely to have the greater power to manage the market by, for example, guiding commissioners on when and how to bundle, integrate and procure services. 

It is therefore measured and controlled competition that is being prescribed to help cure the ills of the NHS and a specialist competition authority to help administer it. The bill seems to be back on track.