Yet another blunder from Lansley

GP Commissioning Groups will be paralysed by Competition Law.

Despite seemingly detailed scrutiny, it is only now that many of the flaws in the Health and Social Care Bill are becoming apparent. It has been belatedly realised that one of the main advantages cited in favour of CCGs as a means of cost control, the treatment of minor ailments within the CCG’s member practices, would in fact be illegal under EU competition law.  A CCG can be interpreted to be, under EU law, “an association of undertakings”, and EU rules prohibit such entities from commissioning services from themselves.

We sought clarification from EU competition expert Michael Lloyd, who told us that such services would have to be tendered out. Tendering is a time-consuming and costly process at the best of times, but this would make it more complex still, due to the need to ensure the “level playing field” between bidders that is at the heart of competition law, especially when those judging the competition between providers are so strongly connected to one of the competitors. He said

“It’s going to be pretty much impossible to do. It would require the creation of “Chinese walls” between the CCG’s provider and commissioner roles to make it legal, but in practice this arrangement would create strong grounds for external challenge by other potential providers.”

So GPs who do as instructed and self-refer work may be required by Monitor to compensate their private sector competitors under EU competition rules, with this being enforced by the NHS Cooperation and Competition Panel (CCP).

The Bill will merge the CCP with Monitor, whose other role is the privatisation of NHS hospitals. The CCP enforces rules which subordinate cooperation to competition with the rationale of protecting patient choice as the overriding priority. It assumes that competition is always in patients’ interest, and requires proof of benefit to patients for any reduction in competition. It is chaired (for about £80 per hour) by Lord Carter of Coles, who is also chairman of US private health giant McKesson UK (at more than $500 per hour) and of a private equity firm registered in a tax-haven with major investments in healthcare.

He excludes himself from decisions directly affecting his other employers, but he is responsible for enforcing and promoting a regime which strongly favours private sector entrants into NHS-funded care, to create a mixed competitive market, meaning an influx of such profit-led transnationals and asset-strippers such as Lord Coles’ other employers. The CCP’s governing Principles and Rules for Cooperation and Competition have been described by a more moderate economist from the Kings’ Fund think-tank as “written by a neoliberal economist on speed”.

It summarises itself thus:

This document sets out the principles and rules which the Department of Health expects commissioners and providers of NHS services to follow to ensure cooperation, while protecting competition, in NHS services. It includes obligations regarding fair commissioning, requirements to cooperate, prohibitions of anti-competitive behaviour and rules on approval of mergers.

It prioritises protecting and encouraging competition with the justification that the increase in choice for patients that this creates is always beneficial. This is the benefit to patients that the White Paper speaks of. All the rest is downside.

McKesson has been forced to pay hundreds of millions of dollars in compensation for defrauding the US government, and its former Chief Executive swindled its shareholders out of $8.6 billion, suggesting that its corporate culture is unlikely to enhance NHS care. McKesson UK’s new Operations Vice-President (who will oversee the company’s bids for new contracts as well as its ongoing NHS IT contracts) was formerly the CCP’s Chief Executive. There he assisted a group of private firms in demanding a public investigation into commissioner discrimination against them. This is an option available whenever a public sector provider wins a tender for providing NHS services. He also advised them to petition the government to strengthen competition regulation when the Bill passes into law1.

In the Netherlands, the Competition Authority recently fined the national GP association £6.4 million (€7.7 million) for trying to ensure that everyone in the country had access to a local GP by preventing over-provision of services in more desirable areas, leaving some places unserved.

Andrew Lansley’s promises that commissioning by CCGs will be more responsive to patients and cheaper are shown to be quite wrong, founded on wishful thinking and lobbyist’s demands to open up the NHS budget to the private sector.  Part of the reason why he keeps making these mistakes seems to be that he doesn’t fully understand the reform, and has no real idea how it could work in practice.   When challenged on why he will give no detail of how the reforms will work in practice, he recently said that the details would be worked out in partnership with doctors. That approach seems likely to land the GPs with a lot of fines for contravening competition rules.

There is going to be chaos in the NHS.

It’s also going to be expensive.

This is due to the introduction of several extra layers of profit extraction (for every referral, commissioning support organisation, hospital or other secondary care provider, and another for any facilities that any of them outsource), creation and maintenance of multiple commissioning (market) administrations, competition regulation, and the redundant capacity required to support a market. The idea of self-referrals was one of the few mechanisms suggested by which the new system could deliver better value, and now it emerges that it won’t work.

The government’s solution to cover this extra cost is to bring in “private sector funding”. This means individuals and possibly employers, as in the USA and Germany. There will be a core package of NHS funded services, delivered increasingly (and in five years or so almost entirely) by the private healthcare industry, much of it based in the USA. We will be required to pay directly or to purchase private health care insurance individually to secure any care beyond the minimum NHS-funded package.

This is plainly an electoral disaster in waiting for both parties in the Coalition, but it is far worse than that: there may be no way back. If a service is taken back into the NHS and private providers are excluded, they can sue under competition law: this threatens the reversal of the gradual denationalisation that this Bill sets in train.

Dr Lucy Reynolds, London School of Hygiene and Tropical Medicine

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12 Responses to Yet another blunder from Lansley

  1. botzarelli says:

    Monitor wouldn’t have the resource to ever investigate such small matters under its competition law powers. There would be an infinitesimal chance of getting the European commission to investigate. The cost of private enforcement by litigation is prohibitively high for small value arrangements. Self-provision is an established exception to the eu public procurement rules on tendering so there’s little chance that anyone would be compelled to put minor work that they wish to do themselves out to tender, regardless of any broader presumption of contestability.

    The broader principles and purposes of the bill may well not be good, but the criticisms relating to competition law, as distinct from those on the basis of whether competition is relevant at all, are largely misguided or scaremongering.

    Michael Lloyd is a shipping and aviation lawyer, not by any means an expert on competition law.

    • Charles West says:

      Thank you Angelo. You may well be right that this is not the worst feature of Lansley’s proposals, though I have had it from more than one source that this is a major issue.
      The fact that litigation costs are likely to be prohibitive might be expected to exacerbate the asymmetry in power between multi-national providers and small CCGs.A group of GPs is not likely to push their luck if they think that they will be taken to court by a powerful and well-resourced company.
      Thank you too for the link to your blog. I look forward to reading more.

      • botzarelli says:

        Thanks for the reply and for taking the time to read my blog (I’m always conscious of the risk to be seen to be spamming blogs of people I don’t already know!).

        I take your point on asymmetry of resources but even then the mechanics of competition litigation are such as to discourage it, even though that goes against broader economic policy for both the current and previous government. The Court of Appeal set out that it was going to be very reluctant to interfere in freedom of contract to enforce competition laws unless there was a clear consumer benefit that would be secured by so doing. Whether one looks at the taxpayer or patients as the consumer it will be exceptionally difficult to put together an argument to interfere with these sorts of decision, however well-resourced the claimant. Competition claims are very much harder to bring than to defend and the consumer benefit angle is unlikely to be satisfied in any claim seeking to prevent doctors from treating their own patients.

  2. Jean Robinson says:

    But CCGs are not providers and GP practices are independent contractors so as long as the CCG GPs do not commission services directly from their own practices, is there still a conflict? Lawyers must be rubbing their hands with glee at the prospects of sorting out this mess

    • Charles West says:

      The case being made is that the government is hoping that CCGs will save money for the NHs by getting GPs to do lots of minor procedures in their own Practice instead of referring them to hospital. That would potentially lay them open to action from aggrieved providers.

  3. john donoghue says:

    NHS Bill just been passed.Are you now going to demand Clegg resign?

    • Charles West says:

      I am reported as saying:
      “In the instance of the Health and Social Care Bill, the leadership has not consulted with the membership, or those within the party with relevant expertise. He has chosen to ignore party policy. If this bill does go through on March 20, Nick will subsequently have to justify his decisions and position to the party, and then ultimately, the party will have to decide whether he carries on as leader.”

      Not a bad article if you want to read it all

  4. john donoghue says:

    Is that a yes then?

  5. Gordon Brace says:

    None of us could have imagined, when the coalition agreement was published, that either this NHS bill or the budget as framdom could be blessed by the leader of the Liberal Democratic party. Neither the NHS law, as now made, nor the budget, is remotely liberal and the process giving birth to them was a long way away from democratic. My instinct is to resign from the party (which including the Liberal Party) has had my enthusiastic and financial support since 1961. I am amazed that it could have come to this. The problem is that my political beliefs have not changed and there is no political party which shares them anymore. I vigorously defended the leadership when they went into coalition, believing that they had sacrificed party for country – a correct priority – We had rebuilt from 5 MPs to a force to reckoned with once, and could, I thought, do it again (though not in my lifetime). However, the sophistry of the present position and bleating which has replaced oratory is sick making. My loyalty to my local Councillors and workers inhibits quitting, but is that merely conniving?
    Gordon Brace

    • Charles West says:

      Thank you for this Gordon.
      You are not alone in facing this dilemma.
      Happy to discuss further if you would like to eMail me.

  6. john donoghue says:

    Are you going to ask Clegg to resign over the NHS Bill? As you have said in your own words ““In the instance of the Health and Social Care Bill, the leadership has not consulted with the membership, or those within the party with relevant expertise. He has chosen to ignore party policy. If this bill does go through on March 20, Nick will subsequently have to justify his decisions and position to the party, and then ultimately, the party will have to decide whether he carries on as leader.”
    Looks like a resignation matter to me.

    • Charles West says:

      I am afraid that you are going to have to wait to see the outcome of this one John. I have suggested some actions that will need to be taken by Nick as leader of the Party, and an action that will need to be taken by the Party collectively. I have not put a definitive timescale on this. As a Local Party Chair and a member of the party I have a number of possible actions open to me. I have my personal thoughts and I have personal conversations. Neither of those are necessarily appropriate for me to put into the public domain at this time. If you are a member of the Liberal Democrats, you could of course take action yourself.

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