The Competition Commission (CC) has published its provisional findings in its merger inquiry into Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust (Bournemouth) and Poole Hospital NHS Foundation Trust (Poole). This is the first merger of NHS Foundation Trusts to be considered by the CC and the provisional findings are of great interest to the NHS and others in the healthcare sector.
The CC’s provisional findings are that the merger will result in reduced competition. It has clearly not accepted Bournemouth and Poole’s arguments that clinical benefits and resulting efficiencies would outweigh any negative effects. It seems likely that in the absence of convincing new arguments from Bournemouth and Poole the CC will prohibit the merger at the end of August.
The findings provide some clear messages for NHS bodies to take into account for future mergers:
Competition drives quality
The CC has made a categorical statement on the effect of competition on hospitals’ services: “The greater the number and quality of alternative hospitals in the local area, the stronger the trusts’ incentives will be to focus on delivering those aspects of quality that are important to the trust’s patients and their GPs.”
The ‘failing Trust’ defence is difficult to argue
The CC has rejected Bournemouth and Poole’s arguments that Poole would ‘exit the market’ due to financial difficulty if the merger did not take place. Many FTs are likely to be financially constrained in the future but even where financial failure is certain, this does not necessarily mean that such FTs could run ‘failing’ arguments as a successful justification for merger.
Patient choice is more than just choice of consultant
The argument put forward by Bournemouth and Poole that they had no incentive to compete as they shared consultants was rejected – consultant choice was not seen to be the sole factor in patient choice: waiting times and proximity of the hospital are also very important.
Regulatory safeguards do not remove the need for competition to drive quality
Bournemouth and Poole have argued that regulatory safeguards and incentives exist to ensure high quality care and these would still be effective post merger. The CC’s response is that regulation of quality ensures minimum standards regarding elective services but it does not remove the incentive to compete on quality.
Detailed analysis of healthcare markets is required
In its inquiry, the CC has broken down the healthcare market into separate clinical specialties and whether these are outpatient or inpatient (including day patient), elective or non-elective markets. This level of detail will clearly be expected from the CC in its future inquiries.
Non-elective and community services
The CC has found that lack of hospital choice due to ambulance protocols, and other more obvious factors, mean that the Bournemouth/Poole merger would be unlikely to result in reduced competition in non-elective services. Community services were also not deemed to be affected as there is no service overlap between Bournemouth and Poole.
Compelling arguments about benefits are required
Bournemouth and Poole have argued for economies of scale, improved consultant cover, synergies and financial resilience, with Poole concluding that a merger with Bournemouth would be the most beneficial outcome in ensuring financial stability and compliance with Royal Colleges’ guidance. These arguments have apparently not been successful. Cogent, clear and compelling arguments will be key to success.
The CC has stated that neither Bournemouth nor Poole has proposed any ‘remedies’ (such as legally binding undertakings as to how it would behave as a merged trust) in order to try and address the CC’s concerns on reduced competition. This means that the CC is currently only considering outright prohibition of the merger. Concerted engagement with the CC on remedies has to be vital where it is or becomes clear that a merger raises significant competition issues.
Relationship of competition to other regulatory processes
Even if the OFT or CC approve a merger, the merger parties and commissioners still have to consult with an open mind the public and local authorities about service changes
Trusts should always consider if there is an alternative to merger. For example:
• Can commissioners recommission services to achieve service redesign without a merger taking place?
• Can providers transfer services between each other without triggering the threshold criteria for a merger?
Hempsons have an expert team of competition lawyers focused on the health sector. For more information please contact Christian Dingwall, Victoria Yuan or Lindsay Draffan.