Competition Law Update: The CMA Report on Private Healthcare

27 May 2014

Practice Area: EU and Competition, Healthcare
Sector: Healthcare



The Competition & Markets Authority (CMA), which has replaced the Office of Fair Trading and the Competition Commission, has issued its final report into the private healthcare sector in April (Report). Following its two-year investigation, the CMA has concluded that there are high barriers to entry and expansion for private hospitals and weak competetive contraints in many local areas. The CMA concludes that this leads to higher prices for self-pay patients in many areas and is requiring a package of remedies. A summary of the main remedies proposed by the CMA in the Report are set out below. The Report anticipates that the orders through which the majority of the remedies will be implemented will be made within a period of around 6 months from the publication of the Report, i.e. by October 2014. 

Divestment of hospitals in London

The Report requires the HCA hospital group to divest of some of its hospitals in London. No divestments are required outside of London.

Review of arrangements between PPUs and private hospital operators

The CMA will have the power to review arrangements between private patient units (PPUs) and private hospital operators. Such a review will be done on the basis of a competition test to determine whether the arrangement will lead to a substantial lessening of competition. There will be no compulsory pre-notification of such arrangements but the CMA will have the power to require information from the relevant trust about any PPU arrangements. 

Clinician incentives

The report distinguishes between direct and indirect incentives.

Direct incentives

Direct incentives to clinicians by private hospitals will be prohibited outright and with immediate effect from the implementation of the order. They are described as “schemes or arrangements between hospital operators and clinicians which link, implicitly or explicitly, the value of the rewards provided to a clinician to the value of that individual clinician’s conduct to the hospital operator”. Thus, any scheme which provides an inducement to, or creates an obligation on, a clinician to treat or refer patients for tests at its facilities is prohibited. Examples of direct incentive schemes are:

  • cash payments to clinicians for patients referred or tests commissioned;
  • payments made to clinicians equivalent to a set share of revenues generated from each patient referred for tests or treatment;
  • hospital profit share schemes through which the consultant receives a share of the hospital’s overall profits depending on the amount of revenue they have generated for the hospital;
  • equity participation schemes where the value of the shares allocated to a consultant is based on the revenue they generate at a hospital; and
  • schemes providing consultants with discounted or free use of consulting rooms, secretarial and other administrative services where the value of the benefits provided is, implicitly or explicitly, linked to the amount of revenue generated by the doctor concerned.

Indirect incentives

Indirect incentives are described as “schemes or arrangements between a hospital operator and clinicians where there is no linkage between an individual clinician’s behaviour and the reward they receive”. Not all indirect incentives are prohibited. In particular the Report clarifies that the provision of the following categories of service or benefit are not prohibited:

  • services intended to ensure clinical safety, such as appropriate in-house training; services which are an integral part of a facility’s operation, such as patient admission, administration systems and billing where the consultant’s fee is part of a ‘package price’; and insurance or indemnity cover in respect of the treatment of NHS patients;
  • basic workplace amenities, such as free tea/coffee, subsidised meals in a staff canteen, stationery and (to the extent they are also available to staff generally and not just to a limited number of senior hospital executives) parking spaces; general marketing of the hospital, including production of consultant directories and general promotional events; and
  • corporate hospitality which is proportionate and not tied to referrals. These events  must be disclosed on the facility’s website together with their cost.

Hospital operators need to disclose the types of services that they provide to clinicians. Disclosure should be in place within 6 months of the order.

Hospitals can also continue to offer clinicians higher value services (e.g. provision of consulting rooms, secretarial and administrative services and contributions to professional indemnity insurance) but these are subject to certain conditions to ensure that they do not constitute an implicit incentive to refer patients to the hospital. The Report states that, where such goods/services are provided by a private hospital to a clinician, they should be:

  • charged to the clinician at their fair market value;
  • made available equitably to all clinicians with practising rights at the facility; and
  • disclosed on the private hospital operator’s website (by facility) together with the price charged by the hospital operator to clinicians for each service. 

In relation to indirect incentives, the Report requires full compliance with these conditions within 6 months of the expected date of the order (i.e. April 2015). In determining the fair market value for each of the services, hospital operators should be guided by the value for such a service in the locality of the facility or, if such value cannot be readily determined (e.g. by consulting an estate agented unconnected with the hospital), the fair market value should be based on the full cost to the hospital operator of providing the service, including relevant allocated overheads. Finally, equity participation schemes between private hospitals and clinicians are allowed subject to certain conditions. 

The CMA will have oversight of this remedy and will review its effectiveness within 3 years of the date of the order.

Information on consultant and hospital performance

The Report states that all operators of private healthcare facilities in the UK that admit patients for treatment (i.e. including all hospitals and clinics providing secondary medical or surgical treatments to patients within the UK but not facilities providing consultations and treatments on an outpatient-only basis) must provide patient episode data for all patients treated at their facilities to an information organisation approved by the CMA for processing and publication. It is likely that the Private Healthcare Information Network (PHIN) will be designated as the information organisation.The information to be provided must be sufficiently detailed and comprehensive to ensure that the following types of performance measures at both the hospital and consultant level can be published:

  • volumes of procedures undertaken;
  • average lengths of stay;
  • infection rates, surgical and hospital-acquired;
  • readmission rates;
  • revision rates;
  • mortality rates;
  • information on hospital transfers including between private hospitals and the NHS;
  • relevant information from clinical registries and audits as appropriate and available;
  • measure of patient feedback and/or satisfaction on the service provided;
  • procedure-specific measures of improvement in health outcome (as determined to be appropriate by the information organisation and its members);
  • information on the frequency of adverse events, such as post-operative DVT and cardiac arrest (if determined to be appropriate by the information organisation and its members).

In addition, the CMA expects that the data will be published in stages over 3 years following publication of the Report, with all data made available to the public from April 2017 onwards and will be kept up to date following publication, with the performance measures being updated at least quarterly.

The CMA will review this remedy in April 2019 to consider its effectiveness. 

Information on consultant fees

The CMA states that hospital operators and consultants will be required to provide fee information to patients in writing, using standard letter templates, as set out in its provisional report. This means that, at the time of confirming initial or subsequent outpatient consultation appointments, consultants should be required to provide patients with written confirmation of:

  • the cost of the outpatient consultation, which may be a range but, if so, should be accompanied by an explanation of the factors that will determine the actual fee level within the range;
  • details of any financial interests that the consultant holds in medical facilities or equipment;
  • a list of all insurers which recognise the consultant;
  • a note encouraging insured patients to check the terms of their policy with their insurer, with particular reference to the level of outpatient cover they have; and
  • the address of the information organisation website, with a statement that this contains useful information on hospital and consultant quality information. 

Further the CMA states that, at the time of recommending or confirming further treatment, whether surgical, medical or other, the consultant should provide patients with written confirmation of:

  • their diagnoses; and
  • a fee quote for the specific treatment (pathway) recommended for the patient. For insured patients, this should include all consultant fees that will be charged separately from the hospital fee (surgeon, anaesthetist, radiologist etc) or should include contact details for any specialists whose fees are not included in the quote. For self-pay patients, the letter should set out the package price of the treatment. The quotes should clearly state which services are included and which are excluded, such as unforeseeable complications. Where there are treatment options and the appropriate option can only be selected during surgery, these should be set out clearly with the associated fees. 

There will be a requirement on hospitals to ask all patients undergoing treatment to confirm (by signing) that they have received the above information in advance. In the long term, consultants and hospitals will be required to provide fee information to the information organisation for publication on its website.

The Report anticipates that this remedy will come into effect immediately from implementation of the order.


The Report will have wide ranging consequences for the private healthcare sector in the UK. HGA, who is required to divest of expensive assets as a result of the Report has announced that it will appeal the decision to the Competition Appeal Tribunal (CAT). If the CAT upholds the appeal, or part of it, this could lead to a referral back to the CMA for reconsideration.

For more information about the CMA report or discuss any other competition law matter, please contact Dorit McCann.