July 18: The Autorldade da Concorrencia (AdC), the Portuguese Competition Authority, has sanctioned and imposed fines of €191 million on several private hospital groups and the Portuguese Private Hospitals Association (APHP).
The fines are: Mello Group, €75 million, Luz Saúde, €66.2 million, Lusíadas Group,€34.2 million, Hospital Particular do Algarve, S.A. (HPA), €8.8 million, Trofa Group, €6.7 million and APHP: €50,000.
On the face of it, the fines are hammer blows to the companies. Nevertheless, it may well take a long time before they have to pay. Moreover their ultimate payments may be much smaller than the €191 million.
These provisos are due to a surprise disclosure this week. Margarida Matos Rosa, president of the competition authority, told a parliamentary committee that only a tiny fraction of its past fines against various industries, had been paid. The AdC had received only €22.7 million out of more than €1 billion fines that were imposed in the past five years. Rosa blamed the “collection delays” on the lengthy litigation and court’s procedures.
Portuguese Competition Authority’s Investigation Allegations and Ruling
The AdC alleges that the private hospitals acted in concert and colluded in contract negotiations and prices in dealings with ADSE, a civil servants’ division of the public health system.
The competition regulator opened the case in March 2019, after there were several complaints and media reports. Following an intensive investigation it alleged that certain members of the APHP “coordinated among themselves the strategy and negotiating position” with ADSE between 2014 and 2019.
The AdC concluded in July 2022: “The collective action of these health companies and groups, through and with the joint participation of the APHP, allowed them to put pressure on the ADSE.”
The ADSE then had to “accept prices and other commercial conditions that were more favourable for those companies,” added the regulator. “By acting together, they substantially reduced the negotiating power of the ADSE.”
When setting the fines, the AdC, took “into account the seriousness and duration of the infringement, the degree of participation….and the economic situation of the businesses.”
The AdC said that the fines were based on the revenue of the companies and healthcare groups during “the years of the illegal behaviour”.
Right to appeal but fines are to remain in place
The regulator said that the companies could appeal to the Portuguese Competition, Supervision and Regulation Court to suspend the enforcement of the decisions. To do so, they should demonstrate that the sanction and fines could “cause them considerable damage”. They should also “provide an effective guarantee” that they will be competitive in the future.
But it added that though the “sanctioning decision may be appealed”, “the appeal does not suspend the execution of the fines”.
So far only Grupo Luz Saúde and the APHP have announced their intention to appeal to a competition court judge.
Directors of Grupo Luz Saúde a large for-profit group with 14 private hospitals, 13 private outpatient clinics and 2 senior residences, claimed that the for-profit company “did not commit any infringement of competition law”.
“We believe that this decision by the AdC will eventually be reversed,” the executive committee of Luz Saúde claimed. “The objective was to make the negotiation process more efficient and faster, in the interests of ADSE itself.”
“The ADSE and the Ministry of Health requested negotiations to establish rules for the future,” an APHP spokesman claimed. “As a result of the negotiations carried out between 2016 and 2018, there were very significant price reductions in ophthalmological lenses and other devices, medicines, chemotherapy, gastro etc.”
This “is proof” that the defendants were not seeking better contract conditions, he claimed.
So far, the other companies have not followed suit; perhaps because the AdC had in July 2021, already allowed the them to respond to the allegations and gave them the right to a hearing and defence.
Our Analysis: Even if the ultimate payments turn out to be small, the four hospitals and their associations may suffer reputational damage. The appeals process will likely delay the fines but that may bring in its wake continual adverse publicity.
The regulator says that there were several complaints and media reports. The complainants and media may be sceptical about the denials from Luz Saúde and APHP. They may claim that the regulator made a thorough investigation; that there is good reason why isn’t it waiving the fines; that price cuts to optics etc are well and good, but that the collusion and pricing allegations relate to other services.
Will this stop French hospital group Alma Viva from acquiring Lusiades Saude? It has until July 30 to complete due diligence according to Portuguese press reports.
© Copyright Neil Behrmann
First published in Healthcare Business International