Mergers on the brink of viability

Hospital trusts must put in the spadework before planning a link-up, or it could be blocked

Plans to merge Royal Bournemouth and Christchurch Hospitals and Poole Hospital Trusts were thwarted by the Competition Commission (CC) last month amid concerns the move would reduce competition and choice for patients, leading to a fall in standards.

Coulter

This is the first time the CC has intervened in an NHS merger and the decision could have far-reaching implications for any other trusts wishing to merge. In particular, it is clear that foundation trusts will have to put forward a much stronger case to show a merger is in the interest of patients.

However, it is important for trusts not to be scared off by the CC’s decision and instead use it as a lesson. Trusts will have to take a more sophisticated and evidenced-based approach when it comes to persuading the authorities that a merger will be in patients’ interests.

Intensive scrutiny by the CC is reserved for mergers where competition concerns have already been identified by the Office of Fair Trading (OFT) and Monitor. 

It should be remembered that, of all the mergers reviewed, this is the only one to have been referred to the CC.

Second, it is important to understand why this particular merger was blocked. The CC concluded that it would eliminate competition and choice. In doing so, the commission balanced the potential benefits and dis-benefits, and sought the views of specialist bodies. It is clear that the views of Monitor and local NHS commissioning groups were instrumental. 

In the CC’s view, the trusts did not provide sufficient evidence to support claims that patient benefits would arise as a result of the merger in a reasonable timeframe. The CC’s report refers, for example, to the fact that the trusts had not modelled the benefits and dis-benefits of a proposed reconfiguration of A&E services. In such circumstances it is hardly surprising that the CC took a robust approach to assessing the benefits claimed by the parties. 

So, what lessons can trusts learn from this case? The first will be familiar to those with experience of the CC: it is not inclined to take parties’ statements at face value and you have to provide hard evidence to support your case, including economic reports and models.

The second lesson is equally familiar: if possible, make sure you know who may object to the merger and what key stakeholders are likely to say.

The third? Time spent getting the right advice and doing the groundwork will make the whole process smoother and less likely to result in a prohibition.

The CC’s decision should therefore not stop trusts from seeking to merge, or from seeking other ways to achieve joint efficiencies. But trusts planning to merge would be well-advised to ensure they can provide credible evidence that a merger will be in the interest of patients and that benefits will be realised in a reasonable timeframe. 

Not only will this make obtaining merger clearance easier, it will help trusts in assessing whether a merger really will bring the benefits and efficiencies they are looking for.