Medibank Private Limited has provided court-enforceable undertakings to the Australian Competition and Consumer Commission after investigations regarding unconscionable conduct in its Hospital Purchaser Provider Agreement (HPPA) dealings with Toowong Private Hospital, an independent specialist psychiatric hospital located in Brisbane.
HPPA's are agreements entered into between private health funds and private hospitals by which hospitals agree to provide services to members of health insurance funds at agreed rates of contribution from the funds.
The ACCC's investigations followed a complaint by the Australian Private Hospitals Association, in relation to the attempted imposition of a unilateral variation clause contained within the proposed HPPA with Toowong. The clause would have allowed Medibank Private to vary the terms of an HPPA without the consent of the hospital.
The ACCC formed the view that Medibank Private may have engaged in unconscionable conduct in breach of section 51AC of the Trade Practices Act based on the following matters:
· Medibank Private is Australia's largest health fund which in the relevant period had HPPAs with more than 90 per cent of private hospitals in Queensland ;
- Toowong is a small, 54 bed, independent specialist hospital
- an HPPA with Medibank Private was extremely important to Toowong for commercial reasons
- Toowong's main competitors had HPPAs with Medibank Private
The ACCC believed the conduct may be unconscionable as, for an extended time Medibank Private did not discuss the reasons for the clause or negotiate on it, and that Toowong had the impression that the clause was standard and should not be of concern. Further, the ACCC was concerned that Toowong incurred significant costs and delays in dealing with the HPPA due to the clause. The ACCC notes that there was a disparity of bargaining power between the parties and that the clause, in the ACCC's view, was not reasonably necessary to protect Medibank Private's commercial interests, especially given that the proposed HPPA had two consensual variation clauses.
Medibank Private acknowledged that it may have led Toowong to believe that Medibank Private was trying to impose on Toowoong that unilateral variation clause and in doing so it may have acted in a manner that might be regarded as unconscionable.
Medibank Private has agreed to:
- refrain from including such a clause in future HPPAs with any private hospital
- reimburse Toowong's costs as a result of their dealings regarding the clause
- make a contribution to the ACCC's investigations costs
- review its trade practices compliance program to ensure that future conduct is not at risk of contravening the Act
- undertake an independent audit of its compliance program at the end of one, two and three years after the undertaking and provide a copy of the audit reports to the ACCC
"Allegations of unconscionable conduct remain a high priority for the ACCC", Acting ACCC Chairman, Mr Sitesh Bhojani, said today. "Parties in a strong commercial position, whether it be in the health, retail, franchising or any other sector must be mindful of those unconscionable conduct provisions in their dealings with weaker parties. The purpose behind putting the unconscionable conduct provision in the Act is to induce behavioural change - and the ACCC will take action wherever necessary to ensure that occurs.
"The ACCC urges parties in the health sector to adopt the voluntary Code of Practice, aimed at enhancing the process of contract negotiations, agreed on by the Australian Private Hospitals Association and the Australian Health Insurance Association, as one means of helping to avoid unconscionable conduct".