The Office of Fair Trading has begun a formal review examining what it predicts will be the “first of a number” of mergers between foundation trusts.
HSJ revealed in April that the OFT would look into the proposed merger between Royal Bournemouth and Christchurch Hospitals Foundation Trust and Poole Hospital Foundation Trust, although it did not confirm the move until this week.
The regulator will consider whether the merger will substantially lessen competition and will also take into account value for money for the taxpayer, a factor the OFT does not consider in non-NHS mergers.
OFT director of merger Sheldon Mills said: “We expect this to be the first of a number of mergers involving NHS foundation trusts. Working closely with Monitor, which will advise on patient interests, we will draw on the experience we have gained through examining other healthcare mergers.”
Mergers between NHS organisations are usually considered by the Cooperation and Competition Panel. However, the Health Act 2012 confirmed the OFT will be responsible for ruling on mergers between foundation trusts as they are independent enterprises.
Under the act, the OFT is required to seek “non-binding advice” from Monitor on the benefits to patients. HSJ understands the Cooperation and Competition Panel has advised Monitor on how to interpret this.
Bruce Kilpatrick, head of the city competition team at law firm Addleshaw Goddard, said although the OFT had “less flexibility to take account of efficiencies” realised through mergers, in practice the regulator was “likely to be heavily influenced” by the approach taken by the panel. This would include consideration of value for money for taxpayers.
He said the issues raised by the merger were “not entirely novel” for the OFT, which has previously looked at private sector mergers where the parties compete on service quality rather than price, such as those between pharmacy chains.
The OFT refers all mergers where it judges there is likely to be a substantial lessening of competition to the Competition Commission but can apply an exception if, for example, it judges customer benefit outweighs the loss.
Management from both trusts argue the merger is necessary to ensure sustainable services.
Royal Bournemouth chief executive Tony Spotswood told HSJ the trusts had submitted a “benefits case” setting out the positive impacts the merger could have for patients as well as “specific economies of scale that would not be realisable without coming together”.
The OFT aims to reach a decision by 14 December.