Hospitals must now prove merger benefits

11 Jul 2013 03:18 PM

The review of the proposed merger between The Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust and Poole Hospital NHS Foundation Trust has now reached the stage at which any benefits that might result from it are considered by the Competition Commission (CC). The CC has provisionally concluded that the proposed merger would reduce choice in a number of clinical specialties for local patients. The CC will now consider evidence relating to any benefits that the merger may give rise to.

In its
provisional findings published yesterday, the CC has found that the merger would mean that patients would lose choice across a large number of overlapping elective inpatient (20) and outpatient (36) services provided by both trusts, as well as maternity services and private cardiology services. The CC’s survey evidence has shown that patients—as well as GPs making referrals on their behalf—see the hospitals as the closest alternative to each other.

The CC is concerned that if the merger went ahead, not only would patients lose this choice, but the trusts would lose an important incentive to maintain or improve quality in order to attract patients. It also notes that recent changes to the way the NHS works will mean that this incentive is likely to increase in the future and that the affected services represent about a quarter of the total clinical revenues of each trust.

The CC has provisionally found that the merger is not likely substantially to reduce competition in supply of non-elective services, community services or in any future tenders by commissioners.

The CC does not believe that without the merger Poole would exit the market although it recognizes that it will face financial pressure in the coming years. It notes that other trusts will face similar pressures and that it is extremely rare for any trust to exit the market.

As well as the provisional findings summary, the CC has published a Notice of possible remedies to address the loss of choice, and when considering these, the CC will also take into account any relevant customer benefits likely to result from the merger and the effect of possible remedies on these. The CC will also take account of responses received to its provisional findings in coming to its final decision.

Roger Witcomb, Chairman of RBCH/PH Inquiry Group and CC Chairman, said:

‘This is the first NHS merger which we have looked at and whilst we are conscious that there are important aspects of the NHS that distinguish it from other sectors, health policy has for some time been that patient choice has an important role in incentivizing hospitals to maintain and increase quality. The fact that they stand to gain or lose from patients voting with their feet is important.

‘Our concern is that this merger would weaken this incentive across a wide range of the hospitals’ activities and remove one important driver of healthcare quality. Given the importance of this merger to the patients involved, we do owe it to them to examine its likely effects closely.

‘We think it is likely that some of these incentives, such as payment systems, will be strengthened in the future and so without the merger, the two trusts are likely to be competing to attract patients more vigorously on factors such as clinical outcomes, waiting times, accessibility, quality of care and location of services.

‘It is now up to the trusts to provide evidence that the loss of choice for patients and the resulting loss of incentives to maintain or improve quality will be outweighed by benefits from the merger. We will evaluate all the evidence carefully and we will look to preserve any benefits in choosing a remedy. In order to take benefits into account, we will have to be convinced that such benefits are unlikely to be achieved without the trusts merging and may be expected to accrue within a reasonable period.’

This is the first merger between two NHS foundation trusts to be examined by the CC and it follows the enactment of the Health and Social Care Act 2012, which confirmed the Office of Fair Trading (OFT) and CC’s roles in assessing the competition aspects of mergers involving foundation trusts. Foundation trusts are independent organizations which have a significant degree of autonomy in managing their affairs.

The trusts both provide a wide range of hospital and community-based services to patients in the wider Dorset area. The Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust has 601 beds on two sites. Poole Hospital NHS Foundation Trust has 606 beds, also on two sites. If it went ahead, this merger would combine the only two NHS acute services hospitals in Bournemouth and Poole.

The OFT referred the case on 8 January 2013. The CC had to extend the original timetable whilst it waited for the trusts to supply requested information. The deadline for publication of the final report is now 26 August 2013. The provisional findings, Notice of possible remedies and all other documents can be found on the inquiry home page. Any interested party is invited to respond to the provisional findings report in writing, by no later than 1 August 2013, and to the Notice of possible remedies by 25 July 2013. To submit evidence, please email RBCH.PH@cc.gsi.gov.uk or write to:

Inquiry Manager
Competition Commission
Victoria House
Southampton Row

Notes for editors

1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.

2. The members of the Inquiry Group are: Roger Witcomb (Chairman of the Group and CC Chairman), John CubbinTony Morris and Peter Jones.

3. The Enterprise Act 2002 empowers the OFT to refer to the CC completed or proposed mergers for investigation and report which create or enhance a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.

4. Further information on this inquiry, including the terms of reference and other key documents, as well as on the CC and its procedures, including its policy on the provision of information and the disclosure of evidence, can be obtained from the CC website at: www.competition-commission.org.uk.

5. Enquiries should be directed to Rory Taylor or Siobhan Allen or by ringing 020 7271 0242.