Australian Health Insurance Association

1
Australian Health Insurance Association

• The ACCC View of Key Competition Issues
  Impacting on Private Health
• Presented By
• John Martin
• Commissioner
• Australian Competition Consumer Commission
• 10th November 2005
• Melbourne

2
The ACCC View of Key Competition Issues
Impacting on Private Health

• How ACCC Operates
• Application Of TPA To Health Sector
• Monitoring Report To Senate
• Broad Areas Of Concern
• Specific Issues
• Mergers Authorisations
• Recent Health Mergers
• How Mergers Are Assessed
• Going Forward

3
How ACCC Operates

• Independent Agency
• 7 Commissioners
• Range of Skills
• Operates Like Board
• Committee Structure
• 500 Plus Staff
• Decentralised
• Key Role Via TPA
• Anti Competitive Conduct
• Misleading, Deceptive Trading Practices
• Unconscionable Conduct
• Complaints Driven
• Proactive As Patterns Emerge
• Strong Investigation Evidence Gathering Powers
• Emphasis On Compliance Avoidance Of Problems

4
Application Of TPA To Health Sector

• TPA To Enhance Welfare Of Australians
• Promotion Of Competition Fair Trading
• All Health Business Subject To Competition
  Provisions Of TPA
• Unincorporated Subject To State Fair Trading Acts
• Health Insurance Technically ASIC
• Since 1998 Legislative Changes
• But ASIC Delegate To ACCC
• Health Services Rather Than Financial Services
• ACCC Ensure Health Funds Do Not Mislead
• About Premiums or Conditions

5
Monitoring Reports To Senate

• Certain Sectors Subject of Formal Monitoring
• In Some Cases Pricing Approval (eg. Australia
  Post)
• Other Sectors Monitoring Reporting
• ACCC Reports To Senate Since 1999 On
• Anti Competitive Or Other Practices
• By Health Funds Or Providers
• To Detriment Of Consumers
• Originally 6 Monthly Now Annual
• Report Drawn From Internal Material Submissions
• ACCC Contacts Over 100 Interested Parties
• Latest Monitoring Review
• 23 Submissions
• Including 5 From Health Funds

6
Areas Of Concern

• ACCC Only One Of A Number Of Regulators
• Also Ombudsman State Health
• Spike In Approaches To ACCC Over Past Year
• Medical Info Kit
• Over 11,000 Info Kits Distributed
• 400 Extra Inquiries
• Overall Complaints To ACCC Flat In 2004
• 774 Health Complaints In 2003-04
• Of Which 143 Related To Health Funds
• Main Complaint Area Against Health Funds
• Advertising Or Statements By Staff
• Premium Increases Or Benefit Changes Or Notice
  There Of
• Suspected Arrangements Between Competitors
• Providers Not Having HPPAs With Certain Funds

7
Specific Issues

• Key Features Guide
• Exclusions Restrictions
• Intermediaries
• Portability
• Contracts Between Hospitals Health Funds
• Purchaser Provider Negotiation Code Of Conduct

8
Mergers Authorisations

• Prohibition On Mergers That Substantially Lessen
  Competition
• Merger Requests Generally Informal Clearance
  Process
• Most Do Not Raise Concerns
• Where Concerns Exist
• Either Do Not Proceed
• Or Acquirer Offers Conditions Eg. Divestment
• Where Acquirer Persists Despite ACCC Opposition
• Resolved In Court
• Alternative Avenue Is ACCC Authorisation Of
  Merger
• Where Acquirer Seeks To Demonstrate Public
  Benefit Outweighs Detriment
• Note new Legislation To Change Process

9
Recent Health Mergers

• 3 Hospital Mergers 2005
• Ramsay Acquisition Of Affinity
• Undertaking By Ramsay To Sell 19 Hospitals
• Health Scope Acquisition 14 Of Ramsay Merger
  Hospitals
• Ramsay In Sale Process For Other 5
• Earlier In Year Authorisation For Little Company
  Of Mary
• Owner Of St Lukes Launceston
• Acquired Other Launceston Private Hospital

10
How Mergers Are Assessed

• Hospital Mergers Inherently Complex
• Due To Health System Complexity
• Assessment Focus On Local Markets
• Patients Tend To Use Local Facilities
• Supply Of Hospital Services To Health Funds
• Collectively Negotiate On Behalf Of Members
• Spotlight On Health Fund Hospital Markets Shows
• Price Consumer Choice Issues
• Based On Market Power Of Merged Hospital
• Ramsay Merger Case Study
• 3 markets Price Rises could Not Be Resisted
• Example Of Gosford
• Authorisation Alternative
• Improved Prices Or Quality Of Service
• Medibank Private Sale Issue

11
Going Forward

• ACCC Role Permeates Health Sector
• Given Important Of Health Services
• To Consumer Interests
• Regret Timing Because Unable To Brief On Latest
  Senate Report
• Unlikely To Be Surprised
• Continuing Issues In Some Areas
• Improvements In Other
• Mooted Medibank Private Sale Issue For Future
• Titillating Note To Finish
• Welcome Comments Questions

12
Contacting the ACCC

• ACCC
• PO Box 1199
• Dickson ACT 2602
• Information Centre 1300 302 502
• http//www.accc.gov.au
• Happy to Answer Questions