Health care under ACCC's microscope

By Ebsworth & Ebsworth

The health-care sector is not immune from the watchful eye of the Australian Competition & Consumer Commission (ACCC). The health-care sector has been undergoing substantial economic change in recent years. Acquisitions of general practices and diagnostic businesses by large health corporations have increased significantly, which in turn has brought the industry to the attention of the ACCC. Despite the ethical virtues which guide the health sector, the private practice of health care is still a commercial business. Therefore, just like any other business, the Australian health-care industry is regulated by laws such as the Trade Practices Act 1974. RECENT ISSUES Informed Consent The ACCC has expressed concern that patients might not be adequately informed about the commercial or financial interests of medical practitioners when they refer patients to other health services (such as radiology or pathology.) The ACCC believes informed consent ensures patients have full knowledge of the cost of medical treatment and is a safeguard against uncompetitive conduct. Informed consent has gained importance due to the growing involvement of large health corporations in family medical practices. It has been reported that the country's top five health conglomerates have trebled the number of family medical practices they control during the last two years. It is estimated that between 2,000 - 3,000 of Australia's 20,000 GPs are no in commercial relationships with one of these five companies. Increased concentration of radiology and pathology services and the emergence of vertically integrated health-care organisations (which include radiology, pathology, specialists and GPs all under one roof) are other examples of this trend. An example is when a doctor enters into an agreement with a company for the use of consulting rooms and practice-management services in exchange for a percentage of the consultancy fee. The consulting rooms are in a large medical centre, alongside numerous specialists and facilities such as a pharmacy, a physiotherapy clinic and a pathology collection centre. There are substantial commercial "drivers" for such acquisitions. While GPs might not be great profit-makers in their own right, it has been estimated that a group of 20 GPs can generate cashflow running into millions of dollars a year through expenditure on drugs, pathology, diagnostics, surgery and hospital care. One of the concerns expressed over such arrangements is that commercial goals can put pressure on GPs to refer patients, order tests or meet quotas in the interests of boosting shareholder profits and individual returns which may not be in the best interests of practitioners, patients, and/or the community. The ways in which the Trade Practices Act could be relevant to such commercial pressures are listed below: Third-line forcing Under section 47(6) of the Trade Practices Act and the Competition Code it is illegal for a corporation or person to supply services on the condition that the recipient will acquire services of a particular kind from another person (known as third-line forcing). Therefore, if a health-care provider agreed to supply medical services to a patient on the condition that the patient acquire specialist services from a particular person, this has the potential to contravene s47(6). The maximum fine that could be imposed by the Court on a corporation for such a contravention is $10m. This means medical practitioners need to be careful how they advise their patients when referring them to a specialist as the ultimate choice, from both a health-care and a competititon law perspective, must be the patient's. However, there is a proposal to amend s 47(6) so it is subject to a "competition" test. This would mean a health-care supplier would not engage in third-line forcing if it supplied services on the condition that the client acquires other goods or services from a related company (as long as the conduct did not substantially reduce competititon.) Full-line forcing Section 47(2) also provides for what is known as "full-line forcing". This makes it illegal for a corporation or person to supply services on the condition that the recipient will acquire services of a particular kind from the same person. Again, this conduct is only prohibited if it substantially reduces competition in a particular market. For example, it can be a contravention of s47 if an agreement is reached between a general practitioner and a specialist that the specialist won't accept referrals from other source or only accept them if the patients referred by the GP are given priority. This could substantially lessen comptition, for example, in a country town where there is only one obstetrician and the next available obstetrician is some hours away. Anti-competitive agreements Independent health-care professionals can also infringe s45 of the Trade Practices Act if they decide as a group to:
  • restrict their referrals to a list of particular specialists and refuse to deal with anyone not on that list; and/or
  • charge a common fee for the provision of health-care services.
  • In general terms, s45 prohibits anti-competitive agreements that substantially lessen competition. Under s45 and s4D, agreements between competitors that have the purpose of excluding or limiting dealings with a particular supplier or a particular class of suppliers are prohibited, regardless of their actual effect on competititon. Section 45A also prohibits arrangements between competitors that have the purpose, effect or likely effect of fixing, controlling or maintaining the prices for services. Misuse of market power Corporatisation and the amalgamation of health practices has led to a higher concentration of ownership. While it is unlikely that any one corporation will achieve a dominant position in the Australian marketplace in the near future, some providers could become dominant in particular regions. Obviously there are benefits in large integrated practices such as same-time appointments with specialists, online access to diagnostic services and discounts on pharmacy items. However, if such practices took advantage of any market dominance for the purpose of engaging in anti-competitive conduct, they could be subject to s46 of the Trade Practices Act. Such conduct might include:
  • attempts to limit professional independence in the engagement of health-care professionals;
  • increasing co-payments that result in increased prices; and
  • attempts to use aggressive tactics to prevent new practitioners from entering a local market or force out existing practitioners.
  • Section 46 states that corporations with a substantial degree of power in a market shall not take advantage of that power (eg for the purpose of deterring or preventing a person from engaging in competitive conduct in its market or any other market.) Section 47 issues can also arise out of misuse of market power. An example would be if an exclusive agreement is reached with a party that has a substantial degree of power in a market that substantially reduces competition in a market for one or more of the prohibited purposes under the Act. Unconscionable Conduct Unconscionable conduct also has the potential to be a misuse of market power. The ACCC ha sstated that it regards unconscionable conduct as a high priority area. For example, when Medibank Private attempted to impose a unilateral variation clause in a contract it was negotiating with a small independent private hospital, the ACCC intervened. It obtained a court-enforceable undertaking that Medibank Private would not engage in such unconscionable conduct. The disparity in the bargaining position between the parties was highlighted by such factors as:
  • Medibank Private's position as Australia's largest private health insurer;
  • the small size of the hospital
  • the degree to which the hospital relied on the agreement;
  • the fact many of the hospital's competitors had pre-existing agreements with Medibank Private;
  • Medibank Private's refusal to discuss the clause with the hospital; and
  • the significantr delays and costs borne by the hospital in dealing with the agreement because of the clause.
  • Authorisations Although the main aim of the Trade Practices Act is the promotion of competition, it also allows the ACCC to authorise some forms of anti-competitive conduct that would otherwise be at risk of being illegal. Such authorisations require proof that the total public benefits outweigh the detriment caused by the anti-competitive nature of the conduct. Conduct authorised by the ACCC receives immunity from court action, either by the ACCC or by private parties. For example, the ACCC recently granted an authorisation to eight small private hospitals in NSW to jointly negotiate hospital purchaser-provider agreements with health funds and the Department of Veteran Affairs. It also allowed fee and non-fee-related information to be shared amongst the hospitals through a common agent. The ACCC recognised there were public benefits in the group being better informed and the public detriment wa slikely to be minimal due to:
  • the relatively small size of the hospitals involved;
  • the fact that few of the hospitals completed with each other;
  • the agreement between them did not provide for collective action by way of a group boycott.
  • The Royal Australasian College of Surgeons (RACS) has also lodged an application for authorisation of its processes in selecting, training and examining surgeons in all specialties, its role in accrediting hospital posts and its assessment of the qualifications of overseas-trained doctors. The application followed an ACCC investigation into allegations that the RACS' processes restricted entry to advanced medical and surgical training and therefore breached the Trade Practices Act. In particular, this investigation concentrated on the RACS' role in deciding how many trainees received advanced training in orthpaedic surgery and how it assesses overseas-trained specialists. EMERGING ISSUES Leading up to last year's Federal election, the ALP had indicated support for a system whereby doctors would offer patients a choice of three specialists when making referrals and disclose any financial interests in companies associated with the drugs or services that they recommend. Though the ALP failed to win government, this proposal raises some interesting points. While the nomination of a number of specialists could assist patients in choosing a specialist that best suits their needs, it can do little to address the information assymetry which exists between patients and health-care suppliers. It is often difficult for patients to make informed decisions about the services they need. It could also be the case that the referring practitioner does not believe there are three specialists who would be able to deal with the particular health-care problem facing that patient. Th disclosure of financial interests would also involve difficult questions of what is considered a relevant financial interest for the purposes of disclosure. However, there has been support for the principles surrounding such a requirement. Last year, the Democrats introduced an amendment to the Helath Legislation Amendment (Gap Cover Schemes) Act 2000 requiring hospital doctors to disclose any financial interest in products or services that they recommend to their patients. The ACCC's view is that, at the very least, patients should be informed of the likely cost of procedures by the specialist at the time of consultation. It is currently examining whether silence in relation to fee disclosure may constitute misleading or deceptive conduct in breach of the Act.


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