Competition in the Irish Private Health Insurance Market

The Supply of Hospital Consultant Services
7.32 Almost all hospital-related PHI claims are a combined package of
consultant services and hospital services because the hospitals do not
supply private consultants’ services. Furthermore, the insurer cannot
usually have an influence on the decision on the type and level of
medical treatment that is required by the patient and that will be
refunded by the insurer. Invariably, the consultant is the sole
decision-maker (with the consent of the patient). This is why the VHI
Healthcare states that it has “payer power” but not “buyer power”.
7.33 The choice of consultant is made by the patient and the referring
medical general practitioner or accident and emergency department.
While almost all consultants in Ireland have contracts for
reimbursement with the three health insurers, each consultant is
limited in the number of hospitals that he or she practices in.
Therefore, the referral decision to a particular consultant implicitly is
the major deciding factor in the choice of hospital. Where a
consultant practices in more than one hospital, the consultant usually
decides, after consultation with the patient, in which hospital treatment
may take place. Therefore, it is possible for consultants to direct
medical business to a particular private hospital, within the constraints
of providing best medical care for the patient.
7.34 Apart from the consultant’s dominant role in deciding on the required
medical treatment, consultants services account for approximately
30% to 35% of total claims to PHI insurers in Ireland. Capacity issues
in the private sector may be attributable to consultants as much as to
hospitals. For instance, if private sector waiting lists are significant,
this may be due to either a shortage of consultant capacity or private
hospital bed capacity or both. In fact, the ratio of consultants to the
Irish population is relatively low by European comparisons. There are
very few private consultants that are not salaried employee consultants
in public hospitals. If one assumes that there is a practical maximum
number of hours that consultants can and will work supplying private
consultancy services in addition to their public consultant duties, then
the supply of private medical consultant services in Ireland is,
effectively, almost entirely determined at present by the number and
category of consultants’ posts in public hospitals and that supply is not
susceptible to normal market forces.
7.35 Recent competition-related developments may have augmented the
buyer power of Vhi Healthcare, although possibly only on a temporary
basis. At the behest of the Competition Authority, the Irish Hospital
Consultants Association (IHCA) discontinued its long-standing practice
of representing consultants in negotiations with hospitals and health
insurers because it would be in breach of the 2002 Competition Act.
Following a public consultation on possible models for establishing
market prices for consultant services, the Competition Authority is due
to publish guidelines for possible market mechanisms that might
facilitate the determination of market prices for medical consultants’
services. The relative bargaining positions of consultants and insurers
under any such guidelines can only be fully assessed once the
guidelines are published and in operation.
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