The competition watchdog may well be stirring: Why the health sector needs to be on guard

Jonathan Coates

When we talk to doctors, dentists and other health professionals about the watchdog they most fear, we typically hear about the dreaded letter from the Health and Disability Commissioner’s office.

That apprehension is well placed and may well continue.  However, here’s our prediction.

Over the next five years there will be more than a handful of health professionals who will experience the bark and the bite of the Commerce Commission and would readily exchange half a dozen letters from the HDC for the one they received from the Commerce Commission.

Why? Because one letter from the Commerce Commission has the potential to cause untold difficulties and expense.

The Commission is responsible for ensuring that people comply with the Commerce Act (we’ll come back to the Act soon). Many health professionals have neither much interest in, nor much knowledge of the Commission.  Take it from us – the feeling is not mutual.

The Commission is sufficiently interested in the health sector that it has a website aimed solely at helping those who work in the health sector know what they need to do to comply with competition and consumer laws.  The message is clear – you have been warned.

At its heart, the Commerce Act prohibits anti-competitive behaviour such as agreements between competitors to fix prices.  The issue is that the health sector relies on professionals to work collaboratively and collegially and the focus on collaboration can sometimes lead to practitioners forgetting that, as well as being colleagues, they may also be competitors.

Doctors and others who work in the private sector and as part of clinical groups and associations ought to take particular notice – there is a fine line between collaboration and anti-competitive behaviour.

But it’s not just individual practitioners who need to be on guard.

  • Private hospitals and clinics have also been attracting the Commission’s attention, especially in relation to decisions not to grant privileges to specialists. It doesn’t take much for a decision based purely on clinical grounds to be made to look like a decision made for anti-competitive reasons.  It’s important for private hospitals and clinics to be vigilant when granting and refusing privileges.
  • Professional colleges and associations warrant their own ‘fact sheet’ on the Commission’s website. The Commission acknowledges the important role professional bodies play in setting standards and admission criteria, and quality assurance; but refers to the risk that some of these activities may give rise to concerns under the Commerce Act.  The Commission warns members of such bodies that they may be liable themselves if their membership organisation breaches the Commerce Act.

As for penalties, do not presume that the Commission’s bark is worse than its bite. The consequences of breaching the Commerce Act are significant.  Individuals can be fined up to $500,000 – and fines for body corporates are much higher.  There may also be professional consequences for practitioners.

With the private health sector market continually subject to pressures, all involved need to constantly look at ways to innovate and to maintain the same income levels for the same effort.  For its part, the Commission will be ready to pounce on those individuals who can’t resist the temptation to agree prices with colleagues/competitors.  It’s better to take the time to read and understand the Commission’s fact sheets now – don’t wait until you get that letter in the mail.

For further information contact Jonathan Coates.

Jonathan Coates
DDI: 021 444 356
Email:  jonathan.coates@clarolaw.co.nz

This article is intended to provide a summary of the subject covered only and is necessarily general and brief. It is not intended as legal advice and nothing in the article should be relied upon without getting specific professional advice.