On 1 April 2014, the OFT and the Competition Commission merged to form a single new regulator, the Competition and Markets Authority (CMA), which receives formal advice from Monitor on whether benefits to customers (patients and commissioners) are sufficient to outweigh the anti-competitive effects of any proposed merger that involves a “substantial lessening of competition”.
The OFT and Competition Commission were already active in health prior to their own merger, having caused some ripples in the market by blocking a proposed merger of the Bournemouth and Poole trusts. This caused some commentators to conclude that hospital mergers (outside London at least) were too difficult and that the rules needed an overhaul. The problem with that argument is that health is now a market.
As the new health sector regulator, Monitor is naturally concerned about the perception that CMA and, through its advice, Monitor are getting in the way of mergers that improve care for patients. In fact, despite the mutterings, since the Bournemouth and
Poole decision other proposals have been cleared – and not just in London.
The most recent transaction to receive the CMA’s blessing with the full support of Monitor, is the coming together of Frimley Park, a highly successful FT, with Heatherwood and Wexham Park, an FT in special measures. The press releases issued by Monitor and the CMA make interesting reading – as does the call for evidence on the CMA’s website, which suggests that the hospitals have already merged (for merger regulation purposes), presumably because at Monitor’s request a team from Frimley Park had taken the helm at H&WP.
Monitor’s press release says this case demonstrates that the competition rules do not get in the way of “well thought-out” mergers. The CMA’s press release says that the merger was cleared because the CMA concluded that it did not involve a substantial lessening in competition as “there are a number of other strongly-performing NHS hospitals located nearby which offer similar services”. This means that relevant customer benefits (how the merger would improve services to patients) did not have to be considered at all, although it is also clear from both releases that the CMA did consider evidence on the benefits to patients, which it collected from a number of sources, including the two trusts, commissioners and Monitor.
The CMA’s full decision and Monitor’s advice to the CMA have not yet been published. They should be available shortly and should set out in detail the reasons why it was felt that bringing these two trusts together would not create a substantial lessening of competition. This will help trusts considering mergers to understand the CMA’s current thinking. It will also provide a timely steer for Sir David Dalton’s proposed framework for unsuccessful providers to be supported by successful providers, the scope of which is reported as including takeovers and management franchises – both of which would be mergers as far as the CMA is concerned.