On 14 September 2017, the Competition and Markets Authority ("CMA") published its decision on the anticipated merger between Heart of England NHS Foundation Trust ("HEFT") and University Hospitals Birmingham NHS Foundation Trust ("UHB"). Whilst it was found that the merger may give rise to competition concerns, the merger was approved without referral for a Phase 2 review on the basis that it was expected to give rise to relevant customer benefits - an exception that is rarely satisfied.
UHB operates a single hospital (Queen Elizabeth Hospital) in Birmingham, whilst HEFT operates four sites (Birmingham Heartlands Hospital, Good Hope Hospital, Solihull Hospital and the Birmingham Chest Clinic). The merging parties operate hospitals that are geographically close to each other, and they overlap in the provision of elective, non-elective, community and private patient services. Cooperation between the two Trusts began in October 2015, when Monitor, now NHS Improvement ("NHSI"), asked UHB to run HEFT on an interim basis. This intervention was successful, with NHSI recognising significant improvements shown in HEFT.
In assessing the merger, the CMA considered a counterfactual with HEFT operating independently from UHB and found a realistic prospect of a substantial lessening in competition ("SLC") in relation to 25 elective specialities, where the merging parties were close alternatives for patients. The CMA assessed a range of evidence on closeness of competition, including GP referral patterns (which focus directly on the actual choices made by patients and GPs), internal documents, and third party comments.
The CMA decided to exercise its discretion not to refer the merger for a Phase 2 review due to relevant customer benefits that were considered to outweigh the SLC finding. In doing so it placed significant weight on NHSI's advice, which emphasised the benefits to patients. The CMA stated that only through UHB's management of HEFT could the benefits be achieved. Specific relevant customer benefits identified in this case are:
- hospital-wide improvements including to waiting times, clinical quality issues, governance, stabilisation of clinical services in urgent need, workforce, use of clinical IT, culture and staff morale; and
- specialty-specific improvements to some of the 25 NHS elective specialties identified as giving rise to an SLC.
NHSI advised the CMA that these improvements were merger-specific and that it was highly likely that the benefits would be realised within a reasonable period following the merger.
This decision follows the CMA's recent Phase 2 assessment of the merger between Central Manchester University Hospitals NHS Foundation Trust and South Manchester NHS Foundation Trust, which was also identified as giving rise to a SLC but cleared due to relevant customer benefits. Both of these cases reflect the importance of patient benefits in the assessment of mergers in the public healthcare sector, with the assessment of relevant customer benefits being heavily dependent on the views of specialist sector regulators and commissioners.
With thanks to Louisa Wong of Ashurst for her contribution.
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