The Italian Health System Is not Economic in Nature

Certain elements of competition that raise efficiency do not undermine the social solidarity foundations of a health care system.


A question that has been addressed by the Court of Justice but not in sufficient detail is whether the providers of non-economic health services can compete with each other. The answer is conditionally affirmative. Competition that does not undermine the principle of social solidarity and does not affect the price and/or quality of the services is congruent with the non-economic nature of those services. This is because such competition leads to lower costs and higher efficiency without harming the quality of services provided to citizens. The problem is that most competition on the market also leads to lower costs, higher efficiency and improvements in quality. Hence, the reasoning of the Court does not have much distinguishing power in practice. It is not surprising, therefore, that on 2 June 2021, the General Court, in case T-223/18, Casa Regina Apostolorum della Pia Società delle Figlie di San Paolo v European Commission, had to assess certain elements of competition between hospitals in Italy and to determine whether they could transform a non-economic health care system into economic.[1]

Casa Regina applied for annulment of Commission Decision SA.39913 which had found that public funding of hospitals in the Lazio Region of Italy did not constitute State aid. That Decision was reviewed here on 10 April 2018

The Italian health care system is organized within the framework of the national health service [Servizio Sanitario Nazionale or SSN]. Health care is offered for free or almost free of charge to all patients who are enrolled in the SSN. Services are provided by public hospitals or private hospitals which are contracted with the SSN. Their costs are financed by the SSN whose budget is funded by social security contributions and by other state resources. The management of the SSN is mainly carried out by Italian regions.

Casa Regina claimed that the Commission failed to take into consideration the lack of universality of the SSN, the extent of economic activities in hospitals, and to verify the applicability of the Altmark conditions.

Universality & solidarity

With respect to the alleged lack of universality of the SSN, the General Court noted that in its Decision, the Commission found the SSN to have universal application: It was accessible to all citizens, patients could obtain care from the hospital of their choice, all hospitals under the SSN were obliged to provide free medical care and the system was funded by the state and by social contributions. [paragraph 125 of the judgment]

At the time period that was the subject of investigation by the Commission, the health care system in Italy had undergone reform whose aim was to increase competition and efficiency in the health care sector. Patients were given freedom to choose hospitals and hospitals were given more discretion to control their expenditure.

The Commission considered that the free choice by patients, a certain degree of competition among care providers contracted under the SSN and the other reforms aiming at greater control over costs did not affect the principles of universality and solidarity on which the SSN was based. The system still provided free health care funded by compulsory contributions.

Economic activities & Altmark

With respect to the alleged economic nature of the services provided in SSN hospitals, the Court noted that the Commission had confirmed the non-economic nature of services in the SSN framework. Furthermore, it highlighted that economic services were separated in the accounts of hospitals. [para 129]

With respect to compliance with the Altmark conditions, the Court held that the Commission was under no obligation to check the applicability of the Altmark conditions since it had found that the health care services provided in the SSN framework were not economic in nature. [paras 136-137]

According to the seminal Altmark judgment, public funding that satisfies the four Altmark conditions does not constitute State aid. But the Altmark conditions concern services which are economic in nature.

Then Casa Regina argued that the Commission misinterpreted Article 107(1) TFEU because it incorrectly found the health services in question not to be economic in nature.

In examining this plea, the General Court referred extensively to the judgment of June 2020 of the Court of Justice in the “Dôvera” case [C-262/18 P, European Commission v Dôvera zdravotná poistovňa]. I reviewed this judgment on 30 June 2020 at:

The General Court, first, recalled the definition of undertakings. The concept of undertaking includes any entity carrying on an economic activity, regardless of the legal status of that entity and of its method of financing. Whether an entity is classified as an undertaking depends on the nature of its activity in question. Any activity consisting in offering goods or services on a given market constitutes an economic activity. [paras 146-148]

Then the Court reiterated the well-established principle that Member States are free to define their social security system. In order to assess whether an activity carried out within the context of a social security scheme is non-economic, it is necessary to examine the following elements: Whether the system in question pursues a social objective, whether it is based on the principle of solidarity, whether profit-seeking activities are absent and whether the whole system is regulated by the state. [para 149]

Casa Regina argued that the SSN was no longer based on the principles of solidarity and universality, but on a principle of competition, given the fact that patients could exercise choice and the presence of economic activities in hospitals.

The General Court noted in its preliminary remarks that Casa Regina did not dispute, that the health care services were not profit-oriented and that the system was controlled by the state. [para 152]

With respect to the principle of solidarity, the Court held that the SSN system was characterised by the compulsory affiliation of insured persons, by contributions fixed by law in proportion to the income of the insured persons and not to the risk that they represented because of their age or their state of health and by the compulsory benefits that were fixed by law and which were are identical for all insured persons, regardless of the amount of the contributions they paid. [para 154]

Moreover, the SSN system offered free or almost free health care, regardless of the insured person’s income. The system was mainly financed by the contributions of insured persons according to their respective income. Therefore, the SSN was held to pursue a social objective and implement the principle of solidarity. [paras 155-156]

Presence of competition

Then the Court considered Casa Regina’s claim concerning the presence of competition as a result of patients’ freedom to choose the hospital for their treatment and the possibility of unrestricted market entry by new health providers. The Court acknowledged that the reforms that had been instituted in the relevant period had opened up competition. [paras 158-163]

However, according to the judgment of the Court of Justice in the Dôvera case, the introduction of a competitive element, intended to encourage operators to improve their management and offer their services in the most efficient and least expensive way, did not modify the nature of the Italian system. [para 164]

The principles of universality and solidarity were not affected by the freedom of patients to choose hospitals. Patients exercised that freedom only within the SSN system. [paras 166-169]

The General Court concluded that Casa Regina’s reasoning was based on the erroneous premise that the principles of solidarity and universality excluded all competition and good management, and vice versa. [para 172]

With respect to the presence of economic activities within SSN hospitals, the Court observed that the same entity, such as certain SSN public hospitals, could carry out both economic and non-economic activities on condition that it kept separate accounts. That condition was fulfilled in the present case. [para 183]

Given that all of the pleas of Casa Regina were unsuccessful, the General Court dismissed the appeal in its entirety.

[1] The full text of the judgment, in languages other than English, can be accessed at:

Photo by Camilo Jimenez on Unsplash



Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He is professor at the University of Maastricht and the University of Nicosia. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

Zusammenhängende Posts

18. Jul 2023
State Aid Uncovered von Phedon Nicolaides

The Non-economic Nature of a Public Health System and Regional Development

Introduction This article reviews two judgments: On a public health system and on regional development through capital injections. I. Public health system On 27 April 2023, the Court of Justice rendered its judgment in case C-492/21 P, Casa Regina Apostolorum della Pia Società delle Figlie di San Paolo v European Commission.[1] Casa Regina Apostolorum della Pia Società delle Figlie di […]
19. Jan 2021
State Aid Uncovered von Phedon Nicolaides

Funding of Public Hospitals

Public healthcare provided in accordance with the principle of social solidarity is not economic in nature. Introduction There are two sectors where economic and non-economic activities mix and cause potential State aid problems: healthcare and education. Healthcare and education provided by public institutions do not differ much from healthcare and education provided by private institutions. The critical difference is not […]
25. Aug 2020
State Aid Uncovered von Phedon Nicolaides

The Non-economic Nature of Certain IT Services for Higher Education

Publicly funded educational services are not economic in nature. Activities intrinsically linked to public tasks are not economic in nature. Update on Temporary Framework: Number of approved and published covid-19 measures, as of 21 August 2020: 262* Legal basis: Article 107(2)(b): 28; Article 107(3)(b): 220; Article 107(3)(c): 20 Four Member States have implemented 16 or more covid-19 measures each: Belgium, […]
30. Jun 2020
State Aid Uncovered von Phedon Nicolaides
insurance protected

Health Insurance Based on Social Solidarity Is Non-economic

I am grateful to Peter Staviczky for comments on an earlier version of this article. I am, of course, solely responsible for the views expressed here. Public funding of health insurance systems based on social solidarity does not constitute State aid. Limited competition for the purpose of increasing efficiency does not affect the non-economic nature of such systems. Update on […]
11. Jun 2020
Guest State Aid Blog von Erika Szyszczak

When State Aid Gets Political

We are happy to receive a guest comment on the EU – UK post-Brexit trade negotiations from Professor Emerita, Erika Szyszczak, who is a Fellow of UKTPO at the University of Sussex. This is a longer version of an earlier Blog published on the UKTPO website. Control over State aid is a stumbling block for the future of an EU […]
17. Apr 2020
Guest State Aid Blog von Michail Kamperis
Corona Virus

COVID-19 Measures Adopted and State Aid Measures (Hopefully) to Be Adopted: An Update from Cyprus

We are happy to share with you an update on the Covid-19 measures that are or will be adopted in Cyprus. Our guest auhor Michail Kamperis is a lawyer and partner at the law firm of Ierotheou, Kamperis & Co. LLC Nicosia, Cyprus. * Sign up for our free news alert  Sign Up For Free   Cyprus is one of […]
09. Apr 2020
Guest State Aid Blog von Lexxion Publisher
Woman sitting by the computer

Follow Up Webinar with Phedon Nicolaides on ‚COVID-19 and State Aid Law‘ on 20 April

The European Commission is working on quickly adapting the existing State aid legal framework to address the current Covid-19 pandemic. Join us on 20th April from the comfort and safety of your (home) office to get an insider update on the Covid-19 response by State aid experts from the European Commission and national governments. ✓ Join from wherever you are – […]
04. Jun 2019
State Aid Uncovered von Phedon Nicolaides

Not Every Compensation Is a Compensation in the Meaning of Altmark

Regulation and licensing do not constitute obligations for the provision of an SGEI. Compensation for changes in public policy is not compensation that complies with the Altmark conditions. Introduction The calculation of the compensation for the net extra costs of public service obligations [PSO] is a difficult task. On 15 May 2019, in case C-706/17, Achema et al v Lithuania […]
21. Mai 2019
State Aid Uncovered von Phedon Nicolaides

There Is No Threshold below which Economic Activities Can Be Considered to be Non-economic

Non-economic activities have to be accounted separately from economic activities. The exercise of public tasks assigned by the state cannot protect an undertaking from State aid rules. State aid distorts competition even when it aims to remedy distortions. Introduction Ports, like other transport infrastructures, may operate under public obligations some of which may be of economic and some of non-economic […]
16. Mai 2019
State Aid Uncovered von Phedon Nicolaides

Competitors’ Rights

A competitor must show that it is substantially affected by State aid approved by the Commission in order to challenge the Commission’s decision. Merely being affected by the aid is not enough. To show that aid has a substantial impact, it is first necessary to define the relevant market. This is different from the “distortion of competition” in the meaning […]