In a case that will be of interest to anyone considering transactions in the sector, wherever located, on 17 October 2013, the UK Competition Commission (CC) blocked a hospitals merger. This was the proposed merger between The Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust and Poole Hospital NHS Foundation Trust.
Foundation trusts are independent organizations within the state-run and funded UK NHS (National Health Service) which have a significant degree of autonomy in managing their affairs. UK regulators are required by law to review mergers involving foundation trusts. The CC is the UK’s second-stage regulator, including for mergers.
The CC took the view that the merger would damage patients’ interests by eliminating competition and choice across a wide range of elective specialties, together accounting for about a third of the clinical revenues of each hospital. It considered whether the merger would provide specific benefits for patients which would outweigh the harm from the loss of competition and choice. In this regard, the hospitals said that the merger would allow them to reconfigure their accident and emergency services; to build a new maternity hospital; to set up a ‘hub and spoke’ arrangement for specialised haematology services; and to provide better consultant cover in cardiology at Poole.
Rather strangely, given the amount of effort that will have been expended on this by the parties and their advisers, the CC found that there “simply [wasn’t] enough detail in the hospitals’ plans for us to conclude that any of the claimed benefits are likely to materialise.” The UK Office of Fair Trading, the CC and sector regulator Monitor published on the same day a statement on their approach to hospital mergers, which looks to be an attempt to mollify resulting concerns in the sector about the case, not least as to the length of the investigation.