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Home » Accountability » Are integrated care packages like M&Ms? Expect a competition law armageddon.

Are integrated care packages like M&Ms? Expect a competition law armageddon.


Somewhere along the path of the subconscious of this current Government they realised competition law, as the trojan horse for implementing the private market of the NHS, would be the ‘nuclear option’ gone too far.

After the original set of section 75 NHS regulations had been humiliatingly scrapped, Norman Lamb and other LibDem members in the Upper and Lower House had to ferret around for another way to sell this discredited policy. They found ‘integration’.

The idea of co-ordinated care bundles, delivering outcomes across a range of different domains, seems like an attractive one. For the privateers, their uncanny similarity to the Kaiser Permanente Integrated Care Plan is of course enticing.

Thrust on this that private providers can cobble together au “uber contract”, subcontracting bits of it to various bods, through the ‘prime contractor model’ – and job done.

However, this way of integrating services is a ‘red rag’ to the bull of the competition authorities both here and across the pond.

You have to have been living on the Planet Mars to escape the screw-ups of the regulation of the energy market in the UK.

In 2008, the Telegraph reported the following:

Regulator tells Treasury it has found no evidence that energy companies colluded to increase bills…
Energy watchdog Ofgem has dismissed suggestions that the UK’s six largest energy companies colluded to increase gas and electricity bills. The regulator has also demanded that those alleging price-fixing should produce the evidence.
Alistair Darling, the Chancellor, summoned Ofgem chairman Sir John Mogg and chief executive Alistair Buchanan after Npower, owned by the German giant RWE, last week increased gas prices by 17pc and electricity prices by 13pc.
Mr Buchanan said yesterday: “We have no evidence of anti-competitive behaviour. We see companies gaining and losing significant market share, record switching levels and innovative deals.”

That was unbelievably five years ago.

It was once famously said that, “Integration…is like M&Ms…a thin, sugary veneer of medical ‘science’ over a yummy core of price fixing…” (US Healthcare Executive).

In the US, health care providers are generally converge upon the view that competition concerns – namely the fear of violating competition law – have had a significant chilling effect on progress toward increased integration in the delivery of health care. This, it is claimed, has led to relative ‘conservatism’ over formal partnerships.

What happens in the UK depends on how ‘light touch’ Monitor ends to be – or whether it will be relatively supine. It is still claimed by some that the light touch regulation of the City, originally introduced by the Margaret Thatcher Conservative government, led to the City spiralling out of control.

Cartels are when companies act together to behave in a way together at the expense of the customer.

Quite irrespective of their clandestine character, cartels are difficult to prove due to their varying characteristics. Cartels can be evidentially complex in the sense that the duration and intensity of participation and the subsequent anti-competitive conduct on the market may vary and take different forms.

These specificities impose a near unbearable threshold for competition authorities to prove in detail an infringement, let aside to impose an appropriate sanction reflecting the cartelists’ real participation.

Montesquieu, in his seminal work ‘De l’esprit des lois’ observed that ‘natural equity demands that the degree of proof should be proportionable to the greatness of the accusation’. While the ‘greatness of the accusation’ in cartel infringements is undisputed – especially in light of the magnitude the incurred sanctions – it appears less clear to what extent this should affect the ‘degree of proof’ of those infringements, especially having regard to their specificities.

Article 101(1) TFEU sets out the European competition law position:

The following shall be prohibited as incompatible with the internal market all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

In a famous case called Bayer v Commission, the Court of the First Instance, for the first time ventured to define the term ‘agreement’ as a concept that ‘centres around the existence of a concurrence of wills between at least two parties, the form in which it is manifested being unimportant so long as it constitutes the faithful expression of the parties’ intention’.

Over two centuries ago, Adam Smith, the dean of free market economics, warned: “People of the same trade seldom meet together, even for merriment and diversion, but tbe conversa- tion ends in a conspiracy against the public, or in some contrivanee to raise prices.” ‘^

The costs of violating price-fixing laws are very high: lawyers’ fees, government fines, poor morale, damaged public image, civil suits, and now prison terms.

While the appearance of price collusion or price fixing may seem bad in the energy market, and unproven, what will happen behind ‘closed doors’ for procedures outsourced in the NHS is likely to be a hidden scandal.

There is some truth in making the energy market more ‘competitive’. One, often rarely discussed solution, way is to ‘differentiate the product’, such that they are not all selling the same thing.

For such a homogeneous item such as gas, it is difficult to propose to do this.

Differentiating hernia operations, the bread-and-butter of the cherrypicked NHS for ‘high volume, low cost procedures’, is easier. You can vary the quality of en-suite ‘refreshments’. It’s well known that cinemas attract clients not on the basis of the quality of films, but on their range of things to go with their popcorn.

It may be intrinsically more easy to distinguish different ‘integrated care packages’, by varying the relative proportions of physical healthcare, social care, and social care (the components of what Andy Burnham MP might call “whole person care”).

The “we’ve been doing it for years” phenomenon of collusive practices is a tougher nut to crack. But in some fairness, the new private health providers haven’t been “doing it for years”, as the jet engines for the Health and Social Care Act (2012) for competitive tendering – the section 75 regulations – have only just been legislated for.

Amazingly enough, some producers of ‘folding boxes’ were given hefty fines in the United States in the 1970s. The experience there was that executives in the convicted paper companies acknowledge that the lack of contact between them and company lawyers made it hard to apply the law.

Direct contact between operating managers and members of the legal staff seemed to be less frequent in the companies that were more heavily involved in the conspiracy.

As they say, we live in ‘interesting times’, but, helpfully on this occasion, the experience from other jurisdictions may be quite helpful. Don’t blame me – Le Grand and Propper started it!

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