Federal Court finds Rockhampton obstetricians' boycott of 'no-gap' billing breached competition laws

The Federal Court has made orders by consent finalising action by the Australian Competition and Consumer Commission against three obstetricians, Dr Mark Leyden, Dr Stephen Robson and Dr Paul Khoo for a boycott of 'No-Gap' billing.

"As a result of the ACCC action, almost $97,000 will be repaid to affected patients in and around the Rockhampton region", Acting ACCC Chairman, Mr Sitesh Bhojani, said today.

The orders included findings that all three obstetricians engaged in conduct in contravention of the Trade Practices Act 1974 and/or the Competition Code of Queensland.

"This case highlights that medical practitioners are not beyond the reach of the competition laws", Mr Bhojani said. "The current shortage of medical practitioners in rural and regional Australia is not an excuse to act illegally by breaching competition laws which are intended to enhance the welfare of all Australians".

In April 2002, the ACCC instituted proceedings against the obstetricians who provided private in-hospital obstetrics services in Rockhampton, alleging the boycott of 'No-Gap' billing arrangements offered by a number of private health insurance funds.

The ACCC alleged Dr Leyden, Dr Khoo and Dr Robson made arrangements in December 2000 and January 2001 that none of them would provide private in-hospital obstetrics services to their patients on a 'No-Gap' billing basis. Expenses incurred by the patients for hospital accommodation, paediatric or anaesthetic care or consultations with their doctor in the doctor's consultative rooms prior to or following the birth of their child were not affected by the alleged conduct of the obstetricians.

"The outcome of the boycott was that approximately 200 affected patients were required to pay a gap for the in-hospital medical expenses associated with the birth of their child that they would not have been required to pay if the conduct had not occurred", Mr Bhojani said.

Dr Leyden and Dr Khoo have provided the ACCC with court-enforceable undertakings to refund to affected patients the 'gaps' that the patients were required to pay when the obstetricians engaged in the conduct.

Dr Robson has recently voluntarily paid to his patients a portion of the gap paid by them as a consequence of the arrangement.

As Dr Leyden had not provided his services on a 'No-Gap' billing basis at the time of the arrangements, his patients had always been required to pay a gap and were not affected by the conduct. Although Dr Leyden's patients were not financially affected by the conduct, Dr Leyden's conduct in requiring the other two doctors to enter into arrangements to boycott 'No-Gap' billing had a detrimental impact on the patients of Dr Khoo and Dr Robson.

"Without Dr Leyden's influence, it is likely that the contraventions would not have occurred and that the eligible private patients of Dr Robson and Dr Khoo would have continued to have services provided on a 'No-Gap' billing basis", Mr Bhojani said.

"Medical practitioners pressured by others to engage in such collective boycotts must resist succumbing to that influence as such arrangements are contrary to the law and will be acted upon.

"Medical practitioners who oppose 'No-Gap' billing are free to act on their belief but should respect the right of fellow practitioners to conduct their practices with 'No-Gap' billing if that is their preference".

Although all three doctors provided after-hours services to each others' patients, there was no allegation of a contravention in relation to the after-hours roster. Contrary to assertions by the Australian Medical Association no action was taken by the ACCC in respect of the roster arrangement.

"The ACCC maintains its view that rosters, which are an agreement between doctors to provide services, are not a breach of the Act", Mr Bhojani said.

"The ACCC's concern in this case is that consumers have adequate access to health services, not to pursue doctors who are providing such services within the law".

"The Act deems boycott arrangements anti-competitive due to their detrimental impact on competition. Any allegations of boycotts are a priority area for the ACCC.

"The Rockhampton conduct resulted in substantial harm to Rockhampton consumers. Families expecting a new born can be under financial pressure and should not be saddled with an additional, unexpected bill.

"The ACCC is pleased that consumers who were affected by this anti-competitive conduct will be reimbursed for the amount of the gap that, but for the boycott, the patients would not have been required to pay".

Each obstetrician today agreed to the orders made by the court in relation to the contravening conduct.

By consent, the Federal Court made the following orders:

• findings that Dr Leyden contravened the Competition Code of Queensland by entering into arrangements with Dr Khoo and Dr Robson that none of them would provide private in-hospital obstetrics services on a 'No-Gap' billing basis for their privately insured patients from January 2001
• findings that Dr Leyden was knowingly concerned in the contraventions of the Trade Practices Act by Stephen Robson Medical Pty Ltd (the Company through which Dr. Robson provided private obstetrics services) and Paul P. T. Khoo Pty Ltd (the Company through which Dr. Khoo provided private obstetrics services)
• findings that Stephen Robson Medical Pty Ltd contravened the Trade Practices Act by entering into an arrangement with Dr Leyden that neither Dr Leyden nor Dr Robson would provide private in-hospital obstetrics services on a 'No-Gap' billing basis for their privately insured patients
• findings that Dr Robson was knowingly concerned in the contraventions by Stephen Robson Medical Pty Ltd
• findings that Paul P. T. Khoo Pty Ltd contravened the Trade Practices Act by entering into an arrangement with Dr Leyden that neither Dr Leyden nor Dr Khoo would provide private in-hospital obstetrics services on a 'No-Gap' billing basis for their privately insured patients
• findings that Dr Khoo was knowingly concerned in the contraventions by Paul P. T. Khoo Pty Ltd
• injunctions restraining Dr Leyden, Stephen Robson Medical Pty Ltd, Paul P. T. Khoo Pty Ltd, Dr Robson and Dr Khoo from future like contraventions of the Competition Code and the Trade Practices Act
• injunctions requiring Dr Leyden and Dr Robson to contribute to the cost of publishing a public notice in the Rockhampton newspaper advising Rockhampton residents of the outcome of the matter
• an order requiring Dr Leyden, Dr Robson and Dr Khoo to contribute to the ACCC's legal costs.

Background

'No-Gap billing': In recent years there has been growing community awareness of the extent to which private health insurance leaves members with substantial expenses for private in-hospital medical treatment, known as the medical 'gap'. One reason for the existence of the 'gap' is that funds were restricted by legislation to only pay benefits up to the fee prescribed in the Medicare Benefits Schedule (the Scheduled Fee) for medical services provided in-hospital and many practitioners charge in excess of the Scheduled Fee.

However, since 1995, funds have been able to pay benefits to members in excess of the Scheduled Fee for the provision of private in-hospital medical services, and thus cover the gap, where a negotiated agreement exists between:

• the practitioner and the fund
• the practitioner and a hospital, where the hospital has an agreement with the fund.

Initially, because of opposition of some doctors, these agreements were in limited use. This issue was discussed in the ACCC’s first report to the Senate on anti-competitive and other practices by health funds and providers. A form of such 'agreements' began to be developed with the introduction by AXA Health fund of an 'Ezyclaim' system which tended to be a transaction by transaction process providing practitioners with the freedom to opt in or opt out of a 'No-Gap' arrangement for each particular patient. Under these agreements the practitioner accepts the fund negotiated benefit for all episodes of care provided to the fund’s member. Participating providers bill the health fund directly, by-passing the member.

In addition to the benefits provided under 'No-Gap' arrangements, the Health Legislation (Gap Cover Schemes) Act 2000, which came into effect in August 2000, has enabled funds to cover the gap without the need for an agreement between funds and practitioners. Under Gap Cover Schemes there is no requirement for a practitioner to enter into a contract with a fund. If a practitioner wishes to provide 'No-Gap' billing to their patient for a particular medical procedure under a Gap Cover Scheme then the practitioner must charge at the rate provided for in the patient's fund's schedule of fees. Many funds which have such schemes offer participating doctors the option to bill the patient directly. A key aspect of developing and enacting this legislation was the Commonwealth Parliament's acknowledgment and concern for out of pocket expenses incurred by patients leading to the public/consumer demand for effective 'No-Gap' arrangements.

Primary boycott: The Trade Practices Act 1974 and the State and Territory Competition Codes prohibit persons who are in competition with one another from collectively agreeing to prevent, restrict or limit the supply or acquisition of goods or services to or from particular persons or classes of people.