Survival of the fittest

The new health and social care bill has been put on ice for now and it may be some time before we see final plans, but there is already a lot for lawyers to consider. Its main thrust can be traced back to the Community Care Act 1990, which established the internal market within the NHS for the first time, under which hospitals and some GPs purchased services from providers. The new plan sees the old buyers phased out, with the Strategic Health Authorities and Primary Care Trusts replaced by GP consortia as the holders of the bulk of the NHS budget.

If the bill is passed, it will create a new NHS commissioning board which will promote the comprehensive health service (other than in relation to public health). The bill provides for the constitution of commissioning consortia, which would be corporate statutory bodies, authorised to act by the NHS commissioning board.

These bodies will be responsible for commissioning the majority of health services. The board would be an independent body and hold commissioning consortia to account for the quality of services they commission. The explanatory notes state: 'The board would have the power to intervene where there is evidence that consortia are failing or are likely to fail to fulfil their functions.'

What is likely to be of most interest to lawyers is the new commissioning consortia and the way goods and services will be bought for the NHS. Consortia will be established in accordance with chapter A2 of part 2 of the NHS Act (subsection (1) of new section 1(E) and will have the function (subsection (2)), of commissioning services and facilities for the purposes of the health service in accordance with the NHS Act.

Strategic Health Authorities (SHAs) and Primary Care Trusts (PCTs) are to be abolished. The Health Protection Agency will also be abolished. 'Monitor' will be in charge of ensuring competition and patient choice operate properly. Monitor and the NHS commissioning board will set prices for NHS services. NHS foundation trusts will continue but not the NHS trust legislation which will be repealed currently from 1 April 2014. Healthwatch England and local healthwatch bodies will be set up.

In relation to health and social care workers abolition of the General Social Care Council and the transfer of some of its functions to the Health Professions Council (renamed the Health and Care Professionals Council) will take place. There are also some changes to the Council for Healthcare Regulatory Excellence (CHRE) (renamed the Professional Standards Authority for Health and Social Care). Another abolition is of the Alcohol Education and Research Council, the Appointments Commission, the National Information Governance Board for Health and Social Care, the National Patient Safety Agency and the NHS Institute for Innovation and Improvement.

An important change will be allowinghospitals to go into liquidation and being subject to insolvency legislation. A special administration regime for health is set up under the Insolvency Act 1986. This means that, where a provider of designated services fails, a special administration regime would provide for continuity of those services.

In other sectors of the economy delivering essential public services (for example, the transport and utilities sectors) special administration regimes are in place, as an alternative to normal corporate insolvency proce- dures, to ensure the continuity of those services where a provider fails. Foundation trusts are outside of the scope of the Insolvency Act 1986. The bill makes provision for the application of normal corporate insolvency procedures, byregulations, to foundation trusts.

Insolvency has been very well covered in the bill and the principle that badly run organisations will fail if subject to market forces is just what parts of the public sector need. The provisions in the legislation are sufficient to ensure continuity if there is a failure. If no one feels 'too big to fail' they then operate with more care to the benefit of taxpayers.

Competition

It has been suggested that the changes would subject hospitals to competition law. Where trade between EU member states is affected this could be EU competition law, and, where trade is within the UK, the Competition Act 1998. However, it is already the case that some state health provision is regarded as that provided by an undertaking under UK and EU competition law. The Bettercare case [2002] CAT 7 made this clear.

Although there are no rights to fine state bodies under the 1998 Act and few fines are imposed even on the private sector, it has always been the case that there is a risk NHS purchasing could amount to an abuse of a dominant position and that the OFT could be asked to intervene and make an interim or final order to change conduct which is abusive.

Competition lawyers are already asked to consider the position under the competition rules of PCTs contracting. In any event, the competition rules work well and if anti-competitive arrangements are set up it is as well if competition law is allowed to intervene. There are proposals to seek to ensure GP consortia avoid conflicts of interest.

Clause 64 of the health and social care bill gives Monitor concurrent powers with the Office of Fair Trading under the Competition Act 1998. This is similar to the concurrent powers given to the various utility regulators already. Monitor is also given powers to fine NHS trusts up to ten per cent of turnover for breaches of competition law. The bill does not, however, extend EU competition law nor alter EU competition law.

So, while competition law has been used as a political argument by those against the NHS changes, case law shows it does already apply to state bodies. Giving Monitor the same concurrent enforcement powers under competition law as the OFT is no different from the regime which currently works well with other regulators such as Ofcom.

It will remain the case that large dominant buyers such as the NHS and MoD will get away with one-sided, pro-buyer terms and conditions, which arguably amounts to an abuse of a dominant position. Suppliers do not want to damage their relationship with big customers of this kind by bringing competition law claims.

There may be some tricky issues to consider around group purchasing in relation to which lawyers can look at the January 2011 EU horizontal guidelines for guidance. Consortia will need to be careful they do not go the way of the private school bursars investigated by the OFT for talking between themselves about school fee increases in an earlier case. However, apart from those kinds of concerns, competition law is not going to be a big issue here.

Procurement

Section 67 provides that regulations may impose requirements on the NHS commissioning board and consortia to ensure three factors. First, they must adhere to good practice in relation to procurement. Second, they must protect and promote the right of patients to make choices with respect to treatment or other health care services provided for the purposes of the NHS. Third, they must not act in a manner that would (or would be likely to) prevent, restrict or distort competition in the provision of healthcare services for those purposes.

The regulations may also impose requirements relating to competitive tendering for the provision of services or the management of conflicts between the interests involved in commissioning services and the interests involved in providing them.

Of course the EU public procurement rules continue with full force and effect as GPs will be mostly funded by the state. If contracts fall under the turnover thresholds if procurement is for smaller values than was previously the case that might have an impact as fewer contracts would be subject to compulsory tendering under the EU rules. However, as seen above, section 67 will require competitive tendering in any event.

In practice it will be the competitive tendering in regulations on the GP consortia that is likely to have a bigger impact than the fact they must comply with competition law, which already is the case despite the myths being perpetrated in the press about supposed changes in this area by those with their own agenda.

Although GP consortia will have tobe conscious of the regulations when they are drawn up, they are already familiar with the requirement for competitive tendering.

If those buying are smaller than those previously doing so arguably there will be fewer not more competition law problems as the buyer will be less likely to be in a dominant position than before.