If news that the Office of Fair Trading has referred a proposed foundation trust merger in Dorset to the Competition Commission sent a shudder through NHS senior management, the revelation by HSJ that the OFT now also views non-FTs as under its purview must have felt like a thunderbolt.

The merger of Royal Bournemouth and Christchurch Hospitals and Poole Hospital is the first FT-to-FT plan to reach this stage.

‘If there are flaws in the OFT’s arguments, will the DH be prepared to air this dirty washing and say so?’

Others − including the giant King’s College, Guy’s and St Thomas’ and Maudsley merger in London − will follow, and they too will be assessed by the OFT; not just because it says so in the Health Act, but because it has been stipulated in Monitor’s guidance on FT-to-FT transactions − knocking around since 2009.

The OFT’s move to refer the Dorset case to the Competition Commission on the grounds it believes there could be a “substantial lessening of competition” is significant in itself because it was made despite the FTs’ countervailing arguments regarding sustainability and improved quality.

But the comments from OFT director of mergers Sheldon Mills could have more far-reaching and immediate implications.

Extending the reach of the OFT, as Mr Mills suggests, to mergers and acquisitions involving non-FTs could potentially knock off balance the only real answer the Department of Health has for its 20 or so basket case trusts.

Dirty laundry

The question is this: will Mr Mills’ arguments wash?

In the context of the supposed “do or die” deadline looming over non-FTs, can the OFT genuinely maintain, as Mr Mills did recently, that non-FTs should come under its purview as they have “a substantial level of financial autonomy” over their surpluses?

Being taken over by the NHS Trust Development Authority doesn’t sound like much autonomy to me. But, come to think of it, neither does a “commissioner requested service” ringfence for FTs.

The OFT’s apparent belief that hospitals compete for their income on a “money follows the patient” basis might raise eyebrows as well, as block - sorry “risk managed” - contracts grow in proportion and contractual penalties blunt the intended granularity of the tariff.

But if there are flaws in the OFT’s arguments, will the DH be prepared to air this dirty washing and say so?

Sally Gainsbury is a news reporter for the Financial Times, sally.gainsbury@ft.com