OFT to rule on key pathology mergers as another project collapses

OFT investigations have been cited as a factor in at least one of the three trusts involved withdrawing from a reorganisation of pathology services in Bristol and North Somerset, as well as up to £750,000 extra being added to the costs of a proposed service reconfiguration in the East of England.

The revelations come as the OFT prepares to make two rulings on pathology service mergers, which experts say are likely to set precedents.

HSJ has learned the OFT will announce if it will refer a joint venture between the University College London Hospitals and the Royal Free London foundation trusts and a private firm to the Competition Commission on 8 November.

It will also rule on the East of England reconfiguration, although no date is known.

It is feared these rulings could further undermine already laboured attempts to reform the sector. Two flagship regional reorganisations have been derailed in the Midlands in recent months and Portsmouth Hospitals Trust pulled out of a joint venture with two neighbouring trusts. However, the OFT was not mentioned as a factor in these three cases.

The OFT has a duty to investigate mergers and refer them to the commission if it rules they could result “in a substantial lessening of competition”.

Monitor published a briefing note in June which warned the pathology sector could be especially susceptible to competition rules as trusts looked to merge services in line with the recommendations of the 2008 Carter review of pathology.

The Competition Commission can ultimately block mergers. Its decision on the proposed merger between Royal Bournemouth and Christchurch Hospitals and Poole Hospital foundation trusts is due by Monday and is widely expected to block the plans.

Andrew Taylor who was the founding director of the Cooperation and Competition Panel and is now a partner at Aldwych Partners, told HSJ even if the watchdog did not block the pathology mergers, it could make stipulations that could undermine joint venture business models.   

He said it would be “surprising” if the London project was referred as it involved only two trusts and had a limited impact on competition. However, the size of the East of England Transforming Pathology Partnerships project, which involves seven trusts, meant it was “more likely” to be referred, or at least have a limit imposed on its size.

The Severn project, covering Bristol and North Somerset, all but collapsed after University Hospitals Bristol Foundation Trust and Weston Area Health Trust withdrew support. Weston is continuing discussions with North Bristol and will take a final decision this year.

North Bristol Trust said it would construct its new 5,000 square foot pathology laboratory with the support of Public Health England alone.

A paper to South Gloucestershire Council’s overview and scrutiny panel revealed both trusts that withdrew were concerned centralising services would realise insufficient savings and noted that the prospect of a review of the proposals by the OFT had introduced “additional complexity” to the project.

The two Bristol trusts have just faced scrutiny by Cooperation and Competition panel, now part of Monitor, over a series of service swaps in the city.

University Hospitals Bristol deputy chief executive Deborah Lee said the trust continued to support the principle of a single pathology service but could not proceed as the business case would not realise the required 4 per cent efficiency savings.

Hugh Risebrow, managing director of private pathology provider Synlab’s UK operation, said all trusts considering reorganisations were considering the OFT investigations.

He insisted providers could still get economies of scale by partnering through alliances not based on geographical lines.

“What the OFT is doing is not unreasonable,” he said. “They are trying to stop regional monopolies.”

The OFT declined to comment.