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Speed Medical loses MedCo challenge

Speed Medical has failed in its attempt to judicially review the MoJ’s decision to randomise selection of MROs in the MedCo search function. At a “rolled up” hearing last week (11 December), Mr Justice Cranston concluded that the Secretary of State's decision to configure the search offer in the way his Department did, did not intefere with competition and was not irrational.  

The way that the search offer is currently configured means that a Tier 1 firm appears once on every 14 occasions, 14 being the current number of registered Tier 1 MROs. Speed had argued that that meant that the number of instructions they might receive was restricted. MedCo Director and DWF Head of Motor, Nigel Teasdale looks at the judgment and what it might mean for MedCo’s immediate future.

The configuration of the search offer

Speed Medical Examination Services Ltd (a Tier 1 MRO) had argued that the MoJ’s decision to configure the search offer the way that it did was irrational and acted to limit competition in the MRO market place. Whereas before they could be instructed by any law firm looking to obtain a medical expert, they could now only expect to receive a share of instructions that was dependent upon how many other Tier 1 MROs there were.

They were not seeking to review MedCo as a concept and supported the concepts of Accreditation, Audit, Independendence and Sanctions

Their application to bring a judicial review was refused on paper by Mr Justice Leggatt earlier in the year. They renewed their application for permission before Mr Justice Cranston, sitting in the Queen’s Bench Division on 11 December, arguing that the decision of the Secretary of State for Justice had acted irrationally and in breach of competition law.

On the question of rationality

According to Cranston J, the challenge to the rationality of the Secretary’s decision “never gets off the ground “. In arriving at this conclusion, the Judge outlined the lengthy and extensive consultation process with stakeholders, going back to 2012, and which emanated out of the government’s concern about the rising cost of motor insurance. That consultation process led the government to conclude that, to reduce the cost of motor insurance and in order to better tackle fraud, it needed to focus on tackling the rise of whiplash claims. That conclusion then led in turn to it looking at the way that medical reports are commissioned and the perceived lack of independence between the medical expert and the solicitors requesting the report. Cranston J concluded that the extensive consultation process involved those affected by the MoJ’s decision, including Speed Medical and other MROs.

Even more importantly, in addition to the consultation process, the Government was guided in its decision making by the fact that the proposal for MedCo came from within the claims industry itself; from a combination of the Association of Medical Reporting Organisations (AMRO), FOIL, the ABI and MASS. Further, the decision to go with one Tier 1 MRO and six Tier 2 MROs was based partly on a paper by AMRO in October 2014 on random allocation of MROs, and then on research in early 2015. Given the process of policy formulation that the Secretary of State had pursued before reaching the decision he had, the decision could not be said to have been an irrational one.

The Competition Law Argument

Speed sought to argue that under competition law MedCo was abusing its dominant position in the MRO market without legal justification. Mr Justice Cranston felt this was at least an arguable point (unlike the argument that the decision was irrational) but was ultimately still unsuccessful. Cranston J, following the initial view of Leggatt J to refuse permission to raise a JR, perhaps unsurprisingly held that MedCo is not an MRO and operates in a different market to the MROs and experts it regulates, rather than being in competition with them.

He held that MedCo is in fact a regulator which is operating in the public interest, by implementing a policy of the Secretary of State, with no financial or economic interest in the market it is operating in. Cranston J went on to point out that MedCo is an independent company and its directors must exercise independent judgment. The way that MedCo operates was as a result of a State brokered arrangement to implement its policy, which attracted support from a number of representative bodies including AMRO. In any event, the way that MedCo is set up meant that it is complying with the type of legal requirement, recognised under Schedule 3 to the Competition Act 1998, to be “an undertaking entrusted with the operation of services of general economic interest”.It would therefore be excluded from the need to demonstrate competition on the basis that MedCo is required to comply with a “legal requirement”.

Even if Mr Justice Cranston had found MedCo had acted to restrict competition, that was objectively justified in his view. MROs were part of the problem as conceived by the MoJ. There was rational evidence for the Secretary to arrive at the number of the number of proposed MROs which he did that should be returned within the search offer. Once that decision had been arrived at the number of MROs was then distorted by multiple registrations of MROs and Tier 1 MROs overstating their offering. 

Comment

Speed indicated that it intends to try to appeal the decision, however we understand permission has already been refused. Leaving aside the fact that the application was comprehensibly rejected by the Court, Cranston J also expressed the view that the application itself was premature, having regard to the MedCo Framework Review and in light of MedCo’s ongoing process of audit and accreditation.

Given that Speed was unsuccessful on all points, and having regard to the judgment generally, this result should mean that MedCo will now have greater confidence in tackling the issues that it sees in the MRO market place and in ensuring independence in the commissioning of medical evidence. MedCo can continue to take the steps that it is already undertaking around audit and sanctions, provided it does so in a rational way.

It is interesting to note that the Court categorised MedCo as a regulator and that view may serve to increase the significance of MedCo’s position in the personal injury market place going forward. It will be interesting to see the outcome of the MOJ’s Call for Evidence and whether MedCo will go on to be given additional powers. Furthermore we wait to see what extended role it might be proposed that it could play in implementing part of the reforms outlined in the autumn statement, given the MOJ has indicated it sees MedCo as an important part of those reforms going forwards.

Irrespective of whether further powers are made available to MedCo, given that medical evidence in all whiplash claims up to £10k has to be obtained via MedCo, the existing ability to decide who can or can’t use the system is a strong one and one that MedCo has not been afraid to exercise so far.

The judgment provides some insight into the workings of the MRO market place and in our view further evidence of why regulation of MROs is required. In February of 2015, the evidence available to the MoJ, suggested that it was likely that there would be five or six MROs that would qualify for Tier 1 and 50 or 60 MROs that would qualify as Tier 2 MROs, providing a total number of MROs of between 55 to 66. By June 2015, when MROs would have had to register with MedCo, there were 14 operational Tier 1 MROs and 125 operational Tier 2 MROs recorded, providing a total of 139 MROs. After the announcement, a number of larger MROs incorporated new Tier 2 affiliates or “multiple registrations”, with similar names to the parent. These new Tier 2 MROs would obtain instructions via MedCo and then effectively outsource those instructions to the Tier 1 parent. Speed Medical were one MRO to take this step, incorporating 10 regional Tier 2 MROs. There have been well over 50 multiple registrations created in this way after the decision was announced, representing an increase of almost double the estimated number of Tier 2 MROs four months earlier.

It is tempting to think that the proposed further reforms highlighted in the autumn statement now suggest that the sort of issue raised by this JR is becoming of academic interest only. While those eye-catching government plans have shifted attention elsewhere, it is clear that MedCo will continue to play a role in the future, initially over the likely period of up to 2 years while the planned reforms are introduced, and beyond that in relation to both whiplash claims which fall outside the expected changes, as well as potentially to other types of injury claims and to rehabilitation. Mr Justice Cranston’s judgment has given MedCo additional authority to be able to undertake that type of work.

Contact

For further information about this case and about MedCo generally, please contact Nigel Teasdate on 01772 554264 or by email at nigel.teasdale@dwf.co.uk

Read our update on the Court of Appeal’s decision in Gavin Edmondson v Haven Insurance.

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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