Could Brexit change competition and procurement in the NHS?

Cristina Sarb profile picture

31 August 2017

Cristina Sarb
Policy advisor - regulation


Much ink has already been spilled over the possible consequences of the UK leaving the EU. Every aspect of the government’s negotiating positions, political statements and most recently the EU Withdrawal Bill have been pored over in an attempt to understand the potential implications.

As the UK progresses towards some sort of outcome for Brexit, it is far from clear what the impact will be on the NHS, including the way it could affect competition and procurement. Estimates suggest that the UK currently spends between £5-10bn each year on the NHS market. It is therefore unsurprising that in a pre-referendum survey, over 40% of trusts responding felt that leaving the EU would have a positive impact on procurement and competition rules if it could drive down some of those costs. This stood alone as a potentialopportunity among other Brexit-related risks that health leaders are concerned about.

In a pre-referendum survey, over 40% of trusts responding felt that leaving the EU would have a positive impact on procurement and competition rules if it could drive down costs.

Cristina Sarb    Policy advisor - regulation

From a policy perspective, the Five Year Forward View opened the door for the shift away from competition. Sustainability and transformation partnerships (STPs) have further cemented this changing policy emphasis, arguably marking ‘a decisive shift away’ from competition. Talk of an end of the purchaser-provider split has strengthened this view.

Notably, the most recent admission that competition has all but ceased to be a key driver of NHS policy has come from the Competition and Markets Authority, whose role it is to enforce these rules. In a recent decision, the CMA observed that competition ‘is only one of a number of factors’ and ‘not the basic organising principle’ for NHS services, trumped by other considerations such as growing demand and the wider environment which the sector finds itself in. Such pragmatism on CMA’s behalf is welcome – indeed, this decision could be very significant if it shapes the CMA’s approach to future transactions.

It is therefore timely to ask what the future holds for competition and procurement in the NHS post-Brexit?

 

Brexit – how much change?

EU competition law is enshrined in EU treaties, which the UK will no longer be bound by post-Brexit. As European competition law applies wherever there is competition between ‘undertakings’, much of the controversy has revolved around whether NHS bodies are ‘undertakings’. In any event, the Competition Act 1998 mirrors, at a domestic level, the key prohibitions on anti-competitive behaviour contained in EU treaties.

The EU Withdrawal Bill will convert existing EU law into domestic law, seeking to ensure legal continuity and avoiding a cliff-edge once exit day arrives. Several EU Directives that relate to competition and procurement have already been incorporated into UK law. Brexit will therefore have little immediate effect and the current rules will remain in place for the time being. 

These could be changed in due course after Brexit, depending on the political appetite among UK politicians, but at least in the short term, the status quo looks set to prevail.

The rules could be changed in due course after Brexit, depending on the political appetite among UK politicians, but at least in the short term, the status quo looks set to prevail.

Cristina Sarb    Policy advisor - regulation

Crucially though, competition and procurement in the NHS is influenced by multiple layers of both EU and domestic law. Brexit or no Brexit would still leave a set of domestic rules in place – the Competition Act 1998, the provider licence and the NHS Procurement, Patient Choice and Competition Regulations 2013. Changes on this front are within the gift of the UK government, irrespective of the forthcoming departure from the EU. 

Navigating these multiple layers and parallel regimes has not been without its complications for the NHS and Brexit could offer an opportunity to seize changes where there is currently tension, such as the conflict between domestic and EU procurement regulations. 

Competition in the NHS has always been a hot topic when considering trust mergers. While NHS transactions are not usually caught by merger control rules at the EU level, Brexit could still have some practical implications. For example, the CMA might be faced with a heavier caseload from having to assess transactions previously reviewed by the European Commission, possibly affecting its enforcement priorities, including its review of NHS mergers.

While NHS transactions are not usually caught by merger control rules at the EU level, Brexit could still have some practical implications.

Cristina Sarb    Policy advisor - regulation

The biggest unknown remains around the terms of any future exit. Post-divorce, the UK will still want to trade with the EU. This could potentially bring rules on procurement or competition back into play. In that case, we may not see the legislation already in place being altered in any significant way.

 

Ongoing uncertainty?

The rules introduced by the Health and Social Care Act 2012 have proved to be ‘confusing, hard to follow and potentially contradictory’ for commissioners and providers. Many questions are left hanging over whether the current framework can reconcile the need for competitive tendering with the development of new care models and move to accountable care. The risks include seeing service transformation plans potentially stopped in their tracks due to legal challenges.

Ultimately, it comes back to one key question: Can the direction in which the health service is moving be accommodated under our existing laws and for how long? The Conservative Party’s manifesto at June’s general election stated that if the ‘current legislative landscape’ was hampering the implementation of STPs, the government would ‘consult and make the necessary legislative changes’, including reviewing the internal NHS market. A hung Parliament, along with Brexit Bills dominating the agendamay have dampened the prospect of legislative change.

Ultimately, it comes back to one key question: Can the direction in which the health service is moving be accommodated under our existing laws and for how long?

Cristina Sarb    Policy advisor - regulation

 

However changes are possible within the current legal framework, such as transforming commissioning into a more strategic function to make way for the development of accountable care organisations and systems. So the debate around future legislative change should not preclude that.

It’s not clear whether we have reached the limits of the existing legal framework, but Brexit has so far only added to the uncertainty. Departure may not mean any immediate change, but post-Brexit the UK may gain some freedom to redefine the application of competition and procurement in the NHS.

Crucially, any change will depend in equal measure on the political choices of the government of the day, independent of Brexit.

 

This article was first published by the HSJ on 31 August 2017 

 

 

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Cristina Sarb profile picture

Cristina Sarb
Policy advisor - regulation
@cristinasarb

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