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EU competition policy and healthcare services

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);

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EU competition policy and healthcare services

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  1. EU competition policy and healthcare services Diane Dawson Corpus Christi College Cambridge Based on forthcoming paper with Lyndsay Mountford

  2. 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;

  3. A surprise and a deep political concern • Until the Kholl and Decker decisions (1998) Europeans believed • delivery 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.

  4. 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.

  5. A damp squib? • The objective of the Articles on free movement is to encourage • An 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.

  6. The English Experience • In recent years England has actively promoted a more competitive • Market 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

  7. 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.

  8. 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.

  9. 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.

  10. 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.

  11. 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?

  12. 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 challenged • as impediments to free movement of capital?

  13. 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?

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