Office of Fair Trading
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OFT refers Dorset hospitals merger to Competition Commission
The Office of Fair Trading yesterday referred the proposed merger of two NHS foundation trusts located in Poole, Bournemouth and Christchurch to the Competition Commission for an in-depth investigation.
This is the first merger between two NHS foundation trusts examined by the OFT since the enactment of the Health and Social Care Act 2012 (HSCA), which confirmed the OFT's role in assessing the competition aspects of mergers involving foundation trusts.
The Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust (RBCH) and Poole Hospital NHS Foundation Trust (PHFT) both provide a wide range of hospital and community-based services to patients in Dorset. RBCH has 601 beds on two sites. PHFT has 606 beds, also on two sites.
This merger will combine the only two NHS district general hospitals in Bournemouth and Poole, which compete across a range of clinical specialties, in many cases earning income based on the number of patients referred to them in line with the general rule that 'money follows the patient'.
The evidence before the OFT is that the merger would combine two trusts that compete closely for GP referrals for many specialties and it is likely that the merger would result in few realistic alternative providers for patients and NHS commissioning groups.
As a result, the OFT could not dismiss concerns that in several medical specialties - notably rheumatology, rehabilitation, general medicine, general surgery, geriatric medicine, dermatology, clinical haematology, oral and maxillofacial surgery, cardiology and palliative medicine - the merger might reduce the hospitals' incentives to continue to enhance the quality of those services over the minimum required standards and would result in less choice for commissioners wishing to reorganise services.
Clive Maxwell, OFT Chief Executive and Decision Maker in this case, said:
'Our review found that these two foundation trusts compete with each other in a number of specialties, both to attract patients and funding from commissioners. We decided on the basis of the evidence available, including advice from Monitor, that we could not rely on the potential benefits from this merger outweighing the expected impact on patients and commissioners of a loss of competition. We have therefore concluded that a reference to the Competition Commission for an in-depth review is necessary.'
Merger review to assess the possible competition impact of a qualifying merger is primarily the responsibility of the OFT, in first phase, and the Competition Commission if a second phase review is triggered. Further information can be found in the OFT's Quick Merger Guide.
The Reference Test: the OFT has a duty to make a reference to the Competition Commission (CC) in respect of anticipated mergers if the OFT believes that it is or may be the case that arrangements are in progress or contemplation which, if carried into effect, will result in the creation of a relevant merger situation; and the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
The Enterprise Act 2002 contains three discretionary exceptions in respect of anticipated mergers by which the OFT may decide not to refer a qualifying merger situation even though its legal duty has been triggered. One of these applies when the OFT is satisfied that relevant customer benefits outweigh any substantial lessening of competition resulting from a merger. See the OFT's Exceptions to the duty to refer and undertakings in lieu of reference guidance (OFT1122, December 2010).
On 27 March 2012 the Health and Social Care Act 2012 was enacted. It developed some of the statutory functions of Monitor, which has become the sector regulator for health care. With regard to mergers involving NHS foundation trusts, section 79 of the Health and Social Care Act 2012 imposes an obligation on the OFT to notify to Monitor as soon as the OFT decides to carry out an investigation under the UK merger control rules. Monitor must then provide the OFT with advice on the effect of the matter under investigation on benefits (in the form of those within section 30(1)(a) of the Enterprise Act 2002) for people who use health care services provided for the purposes of the NHS; and such other matters relating to the matter under investigation as Monitor considers appropriate. More information on Monitor's other regulatory functions and role can be found at:
The CC is expected to report by 24 June 2013. It may extend the 24-week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period. This is the first merger between NHS foundation trust hospitals to be referred to the Competition Commission.
The full text of this decision will appear in the mergers section of this website at a later date