Jim Armitage: 'Inducements' to consultants are all part of the plan

Outlook When we think of the doctors' code of conduct, the Hippocratic oath comes to mind. But, as the Competition Commission report into private healthcare reveals, a few years back it was the Bribery Act that was troubling them.

Evidence from the private hospitals operator HCA states that it had to alter the contracts it made with consultants in the light of the Bribery Act due to its "inducements" encouraging them to refer their patients to their hospitals.

As an insurer who complained about the practice explains: "Consultants drive this game – if they're referring patients to the hospital next door and not yours, you're toast. Inducements are only natural."

Incentives pose a clear risk of skewing doctors' decisions, leading them to recommend tests or procedures that might not be necessary, in hospitals that might not be the most appropriate. That's ethically hazardous and drives up costs to insurers.

Prior to the Bribery Act, HCA's consultants had to use their "best endeavours" to refer patients to its facilities.

The condition was scrapped, but across the industry, the commission found other inducements widespread, from free use of consulting rooms to secretarial support and indemnity insurance. Until around 2011, consultants were even incentivised with cash, although this trend moved towards payment in equity instead.

Yesterday most of these inducements were banned, but consultants can still get equity stakes. This troubles me: the hospitals are no longer allowed to link the equity awards to the number of referrals, but consultants will still be choosing between referring patients to a hospital in which they have shares and one in which they haven't. And that's a risky procedure.