Competition tribunal dismisses PMI appeal

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The Competition Appeal Tribunal (CAT) has dismissed an appeal by Federation of Independent Practitioner Organisations (FIPO), which questioned the role of private medical insurers in creating adverse competition in private healthcare.

FIPO had challenged the Competition and Markets Authority's (CMA) finding in the competiton watchdog's final report published in April 2014.

FIPO had disagreed with the CMA's view that there was not an adverse effect on competition arising from the exercise of buyer power by private medical insurers.

The organisation also disagreed with the CMA's remedy requiring more publicly available information on consultant fees.

FIPO's case

Tribunal documents showed that FIPO claimed that the CMA's decision on PMIs was based on the "factually erroneous finding" that consumer choice was not restricted by the PMI's practice of directing policyholders to consultants whose fees were within their caps.

The Tribunal dismissed this challenge on the basis that the CMA had in mind that the practical availability for policyholders (who did not hold open referral policies) of payment of top-up fees could be constrained by the restrictions on the freedom of action of consultants.

FIPO also argued that the CMA's PMI Decision was based on the finding that consultants could compete below the fee caps - which it claimed was unsupported by evidence.

However, the CMA's research concluded there was a real prospect of consultants being able to compete on price even below the cap.

FIPO also said the CMA's decision did not take into account that the buyer power of PMIs had not resulted in a reduction in the overall number of consultants in private practice when the numbers had reduced. FIPO also argued that the CMA failed to conduct any investigation into whether the number of consultants was likely to fall in the future.

The Tribunal concluded the CMA had conducted a careful analysis of what had been happening in relation to consultant numbers generally and in private practice.

FIPO also contended that the PMI Decision was based on the unevidenced finding that the fee constraints imposed by PMIs would benefit customers as premiums would be reduced for policyholders.

In addition, FIPO contended that the Information Remedy was not effective. However, it conceded at the hearing that this challenge could not succeed unless the Tribunal was persuaded that the PMI Decision was unlawful. 

The Competition Appeal Tribunal (CAT) dismissed FIPO's appeal on all 7 grounds.

The CAT held its hearing on the FIPO appeal in January 2015, when a separate challenge by AXA PPP on local anaesthetist groups was also heard. The AXA PPP appeal was dismissed last month.

In December 2014, the CMA appointed the Private Healthcare Information Network to provide independent information for private patients on healthcare performance and fees as required by the CMA's final report.

The judgment means that the website will be able to carry information on consultants' fees along with information on their performance and the performance and fees of private hospitals.

FIPO statement 

In a statement, FIPO said it "considers that the incentives under which private insurers operate have not been properly investigated or understood by the CMA."

FIPO said: "While insurers have an interest in the provision of high quality medical services, they also have a strong financial incentive to steer patients towards low cost medical solutions.

"Unlike in a well-functioning healthcare market, patients cannot just assume that the advice they receive from the insurers is based entirely on their medical needs. FIPO agreed with (Tribunal Judge) Mr Glynn's conclusions that because there is no real price competition between consultants vis-à-vis the policyholders, the imposition of a fee information remedy on consultants (the remedy adopted by the CMA) cannot do anything to improve the competitive outcome.

"FIPO agrees that providing this information may well facilitate tacit collusion, encouraging smaller private medical insurers to follow the Bupa or AXA PPP benefit schedules, leading to further loss of competition between consultants."

FIPO said it was surprised that the "CMA failed to recognise that competition between consultants is restricted by the actions of the biggest medical insurers."

It added that this could be due to the fact these practices were relatively new at the time of the CMA's investigation and were yet to have their full effect on the viability of private practice, which in turn will have knock-on effect on the NHS. 

Since the CMA Report, FIPO said it had seen a steady stream of new initiatives by the major PMIs, who between them control 85% of the market by revenue, further restricting effective competition between consultants.

The FIPO statement added: "A new policy of compulsory e-billing is being put in place across the board. In the case of AXA PPP it is accompanied by an extensive and wide ranging decrease in the benefits available to policyholders. In addition, AXA PPP "fee approved" consultants are no longer permitted to provide their patients with an account of their fees, thus removing the vital link between consultant and patient.

"PruHealth has also embarked on a similar strategy of obligatory e-billing and as with AXA PPP, no patient is permitted to receive a bill from the consultant relating to their treatment.

"Bupa is also rolling out a policy of obligatory e-billing in addition to its long-standing fixed benefit programmes for consultants' services." 

FIPO concluded: "These initiatives have been strongly promoted since the CMA issued its final report but given the nature of a challenge before the CAT, new evidence could not be used in support of FIPO's challenge.

"However, in its report the CMA itself accepted that if the practices of the PMIs were to be ‘extensively and rigidly' applied, there could be an adverse effect on competition. The time has now come to recognise that there is such an effect."

FIPO said it will continue to pursue all possible options available to it."

Further reading 

Competition regulator suffers embarrassing private health review climb down

Bupa demands 15% reduction in hospital group fees

CMA finalises private healthcare changes

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