250 likes | 391 Views
Assessing competition in hospital mergers. Alistair Lindsay 30.9.13. Topics. The landscape Who looks at what? What does Monitor do? Features of NHS hospital mergers at OFT/CC. THE LANDSCAPE. 1.1 NHS hospital mergers. OFT/CC have jurisdiction if: 2+ enterprises cease to be distinct; and
E N D
Assessing competition in hospital mergers Alistair Lindsay 30.9.13
Topics • The landscape • Who looks at what? • What does Monitor do? • Features of NHS hospital mergers at OFT/CC
1.1 NHS hospital mergers • OFT/CC have jurisdiction if: • 2+ enterprises cease to be distinct; and • either • target’s UK turnover >£70m; or • combined share of supply 25%+ • Health & Social Care Act 2012, s. 79 enterprises cease to be distinct if: (a) activities of 2+ foundation trusts cease to be distinct; or (b) activities of 1+ foundation trusts and 1+ other businesses cease to be distinct
1.2 Scope of s. 79 • OFT/CC consider: • FT / FT merger • FT / trust merger • Trust acquisition of activities of FT • FT / third party JV • e.g. proposed UCLH/RFL/TDL pathology JV • May catch: • reconfigurations (see Bristol, CCP) • transfers or pooling of assets, hosting, management alliances, franchising etc.
1.3 Monitor advises OFT • HSCA, s. 79: Monitor must advise OFT on: • the effect of the matter on customer benefits for NHS patients • such other matters as Monitor considers appropriate • Issues: • Impact on timetable? • Are parties obliged to run a benefits case? • “Advice” not binding; when would OFT depart? • How does the CC assess benefits? • What other matters will Monitor advise on?
1.4 The literature • Monitor briefing notes: • Trust & FT mergers: 22/3/13 • Pathology reconfigurations: 3/6/13 • (Draft) merger benefits: 27/3/13 • Cases: • Poole/Bournemouth (OFT, CC PFs) • UCLH/RF neurosurgery (OFT) • SSP/22 GP practices (OFT FNTQ) • ULCH/RF/TDL: pending
2.1 Monitor reviews: • Trust / trust mergers • Advises NHS Trust Development Authority • If Monitor advises TDA to prohibit, TDA may still allow transaction on public interest grounds • Lots of precedents: • Some involving complex behavioural remedies, e.g. Barts • NB Bristol (20.9.13): a brake on reconfiguration • Reason for Monitor/OFT split: no transfer of control • Issues: • Are there material differences of approach between OFT/CC and Monitor/TDA? • Should there be?
3.1 Private hospital mergers • OFT / CC review • E.g. General Healthcare / Covenant Healthcare • HCA / London Heart Hospital • Also: read across from Private Healthcare market inquiry
4.1 Nicholson challenge • £20bn savings over 2011-14 • … whilst pressure to improve quality, esp. 24/7 consultant cover • Providers see mergers as source of savings (single rotas etc.) • But evidence on success of mergers is equivocal • Carter Review (2008): pathology too fragmented
4.2 Not for profit • Doesn’t preclude competition • But affects competition: • For profits focus on returns to owners and therefore aim to provide good quality goods/services • FTs focus on patient care but are required to (at least) break-even
4.3 Highly regulated • Minimum standards (CQC etc) and incentives to raise standards (CQUIN) • What role for competition? • Complex but crucial issue • Gvt policy of promoting choice and rewarding success (PbR, AQP) • CC ascribed significant role to competition in driving patient outcomes • Patients/GPs have and exercise choice • Quality affects choice
4.4 Product market • No price to patients for NHS work, so SSNIP applied to small but significant decline in quality • Demand-side: generally no scope to substitute between procedures • Supply-side: clinicians generally switch between procedures within a specialism • Although trend is towards sub-specialism • Starting point = define by specialism • Split elective / non-elective • Split outpatient / inpatient • Community-only services considered separately • Private = separate
4.5 Geographic market • Catchment data as starting point • 80% plus sensitivity testing • Reflects preferences at current quality • What would happen if quality fell by a small but significant amount? • Evidence-driven: may vary by area/hospital/specialism
4.6 Competitive effects • Elective and maternity: • Mainly competition in the market: • what options does the patient have? • Also potential competition & competition for market • Other non-elective: • Mainly competition for the market • Emergency services 30% marginal tariff rate • Will commissioners organise tenders and will these suppliers bid against one another? • Cf. Bristol (CCP) incentive to maintain/improve quality as commissioners could change • Specialised services: could be competition in the market or for the market
4.8 Poole/Bournemouth: other features • Existing cooperation • NHS duty of “integration” • Shared consultants • But hospitals compete on other parameters e.g. cleanliness • And can compete using the bought-in consultant • Complementarity argument • CC reviewed marketing to GPs
4.9 Poole/Bournemouth:PFs • “2 to 1” is a problem • 20 elective inpatient • 36 outpatient • Maternity • Private cardiology • Even with strong commissioner support • No concerns about: • Other non-elective (unlikely to be bidding against one another) • Community (largely no overlap) • Other private (many rivals)
4.10 How much competition do you need? • What about “3 to 2”? • Not enough for supermarkets, LBOs etc. • But does extensive regulation / residual role for competition cash out here? • Small catchments mean: • (often) few if any rivals in overlaps • What about near rivals outside catchment? • What about nearest neighbours but catchments don’t overlap?
4.11 Exiting firm • Hospitals providing essential services will not be allowed to exit • Instead, new management or, in extreme, special administrator (e.g. South London) • So exiting firm very hard to show • How do you deal (quickly) with takeovers of failing hospitals? • Superior management as a customer benefit (cf. Northumbria, CCP)? • Is a transfer by a TSA subject to merger control (cf. South London)?
4.13 Patient benefits • Issues: • Merger specificity • Likelihood • Reconfiguration obligations • Incentive to deliver if not profitable? • Timely
4.14 Remedies • Monitor has accepted behavioural remedies • CC in Poole remedies notice said nothing short of prohibition would be effective
Thank You For more information www.monckton.com