Since its publication, and despite ongoing revisions, the debate as to whether the Health Bill opens the NHS up to European competition law to a previously unseen level remains a “live” issue. Beachcroft partner Robert McGough and BDO adviser Dr Rupert Dunbar-Rees discuss.

In a recent interview with the BBC, former health secretary Stephen Dorrell stated that this debate had “lost contact with reality”, as competition was already a key part of the NHS and part of the drive to improve services. 

The problem which this debate faces is that there is a degree of confusion over what is represented by the terminology of “competition law” and whether we are talking about the application of the European competition regime (competition law) or the obligations to put the various contracts awarded by public bodies out to competitive tendering (procurement rules).

Competition law and procurement rules have very different implications for English healthcare, both currently and in the future. Considering these two aspects of the competition framework independently, and being clear about which is being discussed would demystify the debate and help clarify the message.

Competition law in the NHS

To conclude that the new bill brings EU competition law into the NHS requires an assumption that it currently does not apply. The basis of this argument is presumably that the “protection” which the NHS had from this previously is that the OFT did not consider that any public bodies involved in the purchasing or supply of goods or services within the NHS were “undertakings”, and therefore were not subject to action under the Competition Act.

In other words, any involvement of these bodies was for “non-economic purposes”. This was reinforced by the EU in relation to a Spanish healthcare case FENIN v Commission in 2006, on the basis that the system concerned operated on the principle of ‘solidarity’.  

It is obviously questionable to what degree this can be transposed into the current NHS, or that envisaged by the reforms.There are a number of recent and proposed changes which could affect the degree of application of competition law, irrespective of the bill.

Recent changes in the NHS structure through the right to request for social enterprises and Transforming Community Services have, while separating out the commissioner and provider functions within various NHS organisations, also increased the number of ‘non-state’ provider organisations. They have therefore exposed some services (which previously would have been provided in-house) to a scenario where they will be considered for competitive tendering. 

The growth of these organisations themselves is also creating a larger market of providers and more potential competition. The extension of Any Qualified Provider (albeit with a more limited, phased implementation from 2012) to a wider range of services, and the distancing of the state from acute sector provision in the form of foundation trusts could conceivably weaken the argument against healthcare provision being for “non-economic purposes”, particularly when individual service lines are considered.

The impact of the bill will therefore depend very much upon the final detail and implementation of the structure of the new clinical commissioning groups, and whether it removes the assumption about undertakings and opens up potential actions for abuse of a dominant position or anti-competitive agreements. The impact could still be limited as the CCGs are to be public bodies commissioning NHS services, and they will need to make arrangements for the management of conflicts between their interests as commissioner and provider.

The impact of true competition law upon the NHS is therefore likely to remain unpredictable until the detail of the actual revisions following on from the NHS Future Forum are known.

Monitor’s role: competition law

One of the key areas for debate in the NHS Future Forum was the role of competition within the NHS. Monitor’s anticipated role has been revised to protect and promote the interests of patients rather than to promote competition. 

The power that Monitor is now going to have over anti-competitive behaviour is therefore more to prevent abuses of competition, rather than promoting competition. The changes will also move the Principles of Rules for Co-operation and Competition (which were administered by the Co-operation and Competition Panel) onto a statutory footing. The panel itself is being transferred to Monitor, while retaining its identity.

It is interesting to note that the Commissioning Board is to take a stronger role under the proposed changes through setting guidance on how choice and competition will be applied to particular services in terms of how they may be bundled or integrated. While the chair of Monitor has been quoted as saying that the changes will still allow them to use competition as a lever for patients’ interests, the government’s response to the Future Forum suggests a much more reactive position for Monitor in terms of dealing with competition issues. 

Competition or competitive tendering?

In reality it is the competitive tendering requirements (procurement rules, as part of the competition regime) which are likely to have a much more significant and predictable day-to-day impact upon the activities of any CCG. 

The proposed extension of the any qualified provider model to a greater range of services and patients is unlikely to resolve this ongoing concern, given the issues with settling a tariff across a greatly expanded range of services. To fully assess the impact of the provisions in the Health and Social Care Bill, we will need to see all the detail including Regulations to enforce the following on the Commissioning Board and CCGs:

  • good practice in procurement,
  • the right to patient choice,
  • the obligation “not to act in a manner that would (or would be likely to) prevent, restrict or distort competition in the provision of healthcare services”, and
  • guidance on the introduction of “any qualified provider”. 

Despite the delayed, phased implementation into April 2012, there is still a significant question mark as to how the AQP model will work in practice and comply with the procurement rules. Practical issues arise from the need to develop national effective tariffs which work locally, and also points such as: (i) how will commissioners manage multiple AQP contracts effectively?;  (ii) how will staff be affected where existing services are fragmented across a multiplicity of providers?; (iii) how would an AQP framework model with ‘rolling admission’ work within the procurement rules?

Some commentators have suggested that the Government should look to amend the procurement rules for this. However, it should be noted that these rules were set down by European Union legislation (enacted in the UK) and as such would not be open to a straightforward UK change of policy. 

However, the European Union is currently undergoing a consultation exercise to determine whether the European procurement rules require changes in order to meet their aim of making the regime less inflexible, complex and an administrative burden. A green paper has been published by the European Commission and it is likely that whatever changes are filtered out from this exercise will have a significant impact upon the competitive tendering which is carried out by NHS organisations for health services.

The increase in the number of externalised organisations outside of NHS which provide NHS services and the moving of provision from PCTs will almost certainly have an increasing impact in terms of the amount of competition/procurement which will take place for NHS contracts. However, being transparent about the language used would be a useful step to ensuring clarity in relation to the level of competition in the NHS.

Competition between NHS providers and non-NHS providers for NHS service contracts is not a new phenomenon. A look at recent history on programmes such as Equitable Access to Primary Care and the re-tendering of the ISTC programme, for example, demonstrates that the debate needs to move away from considering “competition” in an isolated fashion and give more consideration to the existing health marketplace and the evidence about how the rules on procurement and tendering are already affecting providers and patients.