The UK Competition and Markets Authority (CMA) recently published an open letter to private medical practitioners which stresses the importance to them of not engaging in illegal anti-competitive practices. The letter makes clear that:
- individual medical practitioners who charge for private patient work are sole traders and therefore subject to competition law;
- if practitioners provide similar services in the same geographic area they are each other's competitors and should not co-ordinate their prices;
- if practitioners undertake some work within a partnership, but also some outside it as a sole practitioner, they could breach competition law by co-ordinating their commercial conduct; and
- membership associations, such as for particular branches of the medical profession, must not facilitate the co-ordination of their members' commercial conduct, or the inappropriate exchange of commercially sensitive information.
The trigger for the letter was a CMA decision (the Decision) in August 2015 to impose a fine of £382,500 on the Consultant Eye Surgeons Partnership Limited (CESP), a membership association of around 200 consultant ophthalmologists. The CMA found that CESP had breached competition law by co-ordinating the prices that CESP's members charged for private patient work.
The Decision forms part of a recent focus by the CMA on the healthcare sector. A market investigation into private hospitals, as well as several separate investigations into pharmaceuticals, is ongoing.
CMA's concerns over CESP's activities
CESP is a membership organisation which represents both sole practitioners and individual partnerships of private ophthalmology practitioners. However, because its members trade as multiple separate LLPs, they are each other's competitors.
This means that they are prohibited from co-ordinating key commercial activities such as the prices charged by individual ophthalmologists.
In its Decision, the CMA found that the conduct of CESP and its members had breached competition law because of the following alleged practices:
- CESP co-ordinated the conduct of partnerships of ophthalmologists (LLPs) who comprised its membership by negotiating with private medical insurers (PMIs) on their behalf to agree common rates for so-called inclusive private patient package prices (IPPP Prices).
- CESP co-ordinated the conduct of LLPs in response to an initiative by a specific PMI to reduce the price of ophthalmic procedures. CESP recommended that all members de-list their services from the PMI and refuse to be fee-assured consultants. CESP recommended that its LLP members invoice the particular PMI's patients directly at the more expensive self-pay patient price.
- Competition law concerns were compounded in cases where certain consultants treated patients on a sole-trader basis outside the scope of their LLP. The consultants were able to discover the IPPP Prices negotiated by CESP via their LLPs. They then used it as a minimum floor price, even when pricing work and treating patients as sole practitioners, rather than in their LLP.
- Finally, the CMA found that CESP had formed a conduit through which its member LLPs could exchange commercially sensitive information such as their views on pricing (including future intentions) and information on their market conduct. This allowed the LLPs to predict, with a reasonable degree of certainty, each other's future plans.
The CMA found that the overall intention of this co-ordinated conduct was to increase revenue for the CESP LLPs and their consultant members. It also aimed to thwart downward pressure on prices that PMI providers sought to exert.
Consequences for CESP
The CMA found that CESP had breached the Chapter I prohibition of the UK Competition Act 1998 as well as Article 101(1) of the Treaty on the Functioning of the European Union, both of which prohibit anti-competitive agreements. This could in principle have led to fines of up to 10 per cent of CESP's total turnover. Patients and PMIs who were overcharged may also have brought claims for damages.
In this case, the CMA opted to fine CESP £382,000, rather than individual practitioners and ophthalmology practices. The members of CESP instead received a warning letter that made very clear the CMA's concerns regarding their practices and its expectation of their future commitment to ongoing competition law compliance.
In December 2015, some months after its Decision, the CMA issued an open letter targeted at the entire private medical practitioner community more generally, to try to draw their attention to key lessons from the case. Key topics covered by the CMA's open letter are as follows:
- Medical practitioners acting as sole traders are subject to competition law
A medical practitioner who offers his or her services to private patients outside of the employment of an organisation is a sole trader subject to competition law. The CMA expects them to take commercial decisions independently from each other. They should compete locally or regionally to attract patients.
- Medical practitioners continuing to work as sole traders outside a group they work in may raise competition law compliance concerns
If medical practitioners work and trade as a group (such as an LLP), it is permissible for the practice to co-ordinate their prices to have a single combined market presence. However, if members of the practice spend part of their time consulting with patients outside of the LLP as sole practitioners, they need to set their prices independently. There should be no co-ordination of commercial strategy between the LLP and the sole practitioner (such as an agreement not to compete for certain patients). For practitioners who do some work both inside and outside a group, special arrangements may be needed (e.g. different email distribution groups for different classes of information) to ensure no inappropriate commercial information is exchanged.
- Membership associations should not co-ordinate member undertakings’ commercial conduct or facilitate the sharing of commercial information
Members of professional organisations can often be each other’s competitors, especially if located in the same geographic area. Associations should avoid making recommendations or taking decisions which interfere with their members’ commercial conduct, including how they set fees or prices, and avoid facilitating the exchange of commercially sensitive information.
- Collaboration between medical practitioners involving a restriction of competition may be permissible if the reduction of competition is outweighed by benefits to patients
Any co-operation between medical practitioners that comprises a restriction of competition may still be exempt from the application of competition law in very limited circumstances where a countervailing consumer benefit can be shown that arises from the restriction. This is only demonstrated where:
- collaboration improves production/distribution or promotes technical/economic progress;
- consumers receive a fair share of the benefit;
- there are no restrictions on the collaborators not indispensable to achieving the objectives of the collaboration; and
- the collaboration cannot eliminate substantial competition.
Given that the CMA opted to fine only CESP, it is not surprising that each of its members received a warning letter from the CMA. It is, however, relatively unusual for the CMA to also issue an open letter to an entire industry (in this case all private medical practitioners) to explain in detail what practitioners are required to do to comply with competition laws.
The CMA may have been concerned that the behaviour it found when it investigated CESP is the "tip of the iceberg" and that there are potentially other segments of the medical profession also operating in breach of competition law. Given the potentially severe consequences of an investigation and fine, practitioners should take the opportunity now to review their practices and ensure that they are compliant. This is especially important because if, following any future investigation, the CMA finds that a recipient of an open letter has ignored the CMA's advice and nevertheless infringed competition law, higher financial penalties may be levied.
The Decision and the CMA's open letter also applies more generally to any profession where members form themselves into a variety of groupings. This includes private practitioners, partnerships, LLPs and companies who interact with one another via a professional association or trade association.